Thursday – Gas Preview and Oil Inventory Review + Lots More Earnings


Market Sentiment Watch: Cautiously optimistic.

  • Eco Data Watch:
    • Jobless claims came in at 512K vs 520 K expected (lowest since January)
    • Productivity was 9.5% vs 7.3% expected
    • Tomorrow we get the payrolls data for October.

Conference Call List Today:

  • IOC - 8:30 am
  • PXP - 9:00 am
  • CLR - 10:00 am
  • HK - 10:30 am
  • GDP - 11:00 am
  • ATPG - 12:00 pm

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - Earnings comments on CLR, HK 
  6. Odds & Ends


Holdings Watch:

  • $10KP II:
    • $22,600
    • 61% Cash
    • The Current Holdings tab is updated.

Yesterday's Trades:

  • FST – Sold the (10) November $20 Calls I picked up before earnings for $1.70, up 59%. This was a “getting to know the name” trade and I’m still in that process. I liked what I heard on the conference call and will probably be more frequently trafficking in the name.
  • HK – Added (10) HK $25 November calls (HKKE) for $1 (on the mid and easily) with the stock at 24.36.

  • WILDZTRADE: HK – Added (10) HK $26 November calls (HKKP) for $0.65 (also easily on the mid).

  • PXD – Added (5) November $45 Calls (PXDKI) with the stock at $41.60, off about 2%. Reasoning in today’s post and in comments from the call. Going in slowly.


Commodity Watch:

Crude oil rose $0.80 to close at $80.40 yesterday. This morning crude is trading fairly flat after ok retail sales and a better than expected set of jobless claims and productivity data boosted equity futures.

Natural gas fell 20 cents to close at $4.72 yesterday. This morning gas is also trading flat.

  • IEA Predicts Global Natural Gas Glut: "Global gas markets have evolved from a seller's market, driven by tight supply and demand, to a buyer's market as demand weakens while new supply comes onstream,"
  • Tropics Watch: Tropical Storm Ida is now just short of hurricane status off Nicaragua, tracking towards the southern Gulf of Mexico. Lot of land to cross before it hits water again so anything can happen. To my friends in Honduras I say batten down the hatches.

Natural Gas Preview

  • My number: 20 to 25 Bcf Injection. Looking at the weather forecast there is a good chance that this is the last injection of the season. Really a moot point, we're topping out at about 3.8 Tcf and all eyes will be focused on the weather and how fast inventories come off as the real cold hits this winter. 
    • History:
      • Last Week: 25 Bcf on HDDs of 74.
      • Last Year: 23 Bcf
      • 5 Year Average: 33 Bcf
  • Street Consensus: 31 Bcf Injection.

EIA Oil Inventory Review

ZComments: Imports caused the crude stock decline. Why imports are so low and have been so low is a matter of conjecture at this point. Gasoline fell despite a large uptick in imports as demand increased as anticipated by me but not the Street.

CRUDE OIL - Refining throughput fell to its lowest level of this season as utilization tumbled to record lows for this week of the year. This resulted in demand for crude dropping nearly 250,000 bopd from last week and 650,000 Bopd vs last year.








Stuff We Care About Today


WLL Acquires North Ward Estes Royalty Interests; Minor Positive

  • WLL paid $38.7 mm for royalty interests in 2.2  mm BOE in their EOR play in Texas.
  • This equates to $17.59 / BOE (not a bad in the ground price for oil assets right now. Management point out that these are Royalty Interests, not Working Interests, so no lease operating expense, that say that makes them worth about 33% more so equivalent purchase prices would be a lower $11.79 per BOE. That sounds about right.
  • Good money management, not a big deal in the scheme of the total company, minor positive.

CLR Reports Nice Quarter, Guides 2009 Up Slightly, Announces 2010 Budget, Guides To Up 10% Next Year.

The 3Q Numbers:

  • Production of 37,384 BOEpd (74% oil),

    • vs 37,347 BOEpd in 2Q09
    • volumes were up 12% from the year ago quarter
  • Revenue of $168.4 mm vs $171 mm expected

    • skewed slightly higher by sales of 55M barrels from storage.
  • Costs:

    • LOE fell substantially, to $6.50 per BOE, vs $7.14 last quarter and $8.22. This is a very competitive operating expense for such an oily company. Their guidance going forward is a little higher, could be the impact of water flood activity resumption.
  • EPS of $0.26 (net of items) vs $0.23 expected.
  • EBITDA of $128.6 mm vs $119 mm expected.


  • 2010 Budget: $650 mm ($563 drilling / $87 mm land and seismic)

    • Bakken 

      • 66% for 62 net wells in N. Dakota; 4.6 net wells in Montana
      • Will have 7 rigs by January 1st going to 15 by mid year
    • Red River

      • 12% - water flood.
      • See peak of 15 to 15.5 MBOEpd mid
    • Woodford Shale

      • 15% for Woodford and Anadarko Woodford drilling
  • Operational highlights are fairly straight forward with no monster wells to report but solid results out of the Three Forks program.


  • 2009 Now 13.3 MMBOE, above previous guidance of 12.5 to 13 MMBOE (34,250 to 35,600 BOEpd), or 11% over 2008.
  • 2010: 10% (Conservative given the capex)

Nutshell:  Yawn. I own the common but no options at present. I still feel the name needs to grow into its multiple. Management espoused a five year target to double company reserves.

Conference Call: 10 am EST.


HK Beats Top Line; Raises 2010 Guidance

What I Was Looking For Vs. What I Got:

  • Good chance they beat on 3Q volumes. They traditionally have either come in anywhere from center of guidance range to extremely high to guidance. Haynesville wells have exaggerated this habit. Either way they will be able to say they topped 0.5 Bcfepd for the first time, up huge (like 60%) from 3Q08 levels.
    • Mission accomplished. 0.512 Bcfepd largely due to better Haynesville well production. 
  • Probably a reiteration of the 30 to 40% growth in 2010 they announced last quarter.
    • Wrong: They Boosted 2009 numbers and then boosted 2010 to 43% above that bigger base.
  • The Street is expecting bigger wells from them in the Eagle Ford. It would seem likely they deliver a modestly higher rate set of wells (just north of 10 MMcfepd, with a focus on more liquids rich wells) as they announced that JV with SFY which begs the question, why do that if the returns don’t justify it? Answer is that the returns due justify it and that the E.F.S. is every good a shale play as the Haynesville from a rock and organic content standpoint.
    • Nope, IP's contracted relative to their prior wells - hot topic for the call.  They did announce additional acreage in the core and in the oilier Dimitt County area.
  • Probably some Haynesville wells, look for drilling time to have fallen again and well costs to be down again. CHK saying some at $6mm now, last HK said was $8.5 mm.
    • $9.5 mm year to date average, trending to $8 to 9 mm.
  • Budget talk to remain constrained to $1.3 billion next year.

    • Close but they upped it to $1.45 billion. But See Next Bullet.
  • NO DEAL. No debt, no equity, no deal.
    • And I quote:

"The plans outlined today aim to balance 2010 cash flow and expenditures and accelerate drilling in these core shale plays, eliminating the need for future capital raises to fund their development."

On To The Pre Call Quarterly Discusion:

The 3Q Numbers:

  • Production of 512 MMcfepd vs guidance of 495 to 505 MMcfepd:

    • vs 483 MMcfepd last quarter (up 6% sequentially)
    • vs 315 MMcfepd year ago quarter (up 63% YoY)
  • Revenue of $346 mm vs $305  mm expected
  • Costs Trending Lower

    • As Haynesville shale production becomes a bigger piece of the HK pie, its low LOE nature, along with production growth is driving per unit LOE well into best in class territory. This past quarter LOE came in at $0.44 per Mcfe.
  • EPS of $0.11 (net of items) vs $0.12 expected.
  • CFPS of $0.52 vs $0.51 expected.


  • Haynesville Shale:

    • 24 more weels drilled during the quarter
    • On their normal choke regime, IPs averaged 18.6 MMcfepd, up slightly from their past average
    • They are conduction a choked back pilot on 4 wells (14/64") that is showing shallower declines than their normal methodology.
    • Drilling times continue to come down as do costs as mentioned above.
    • HK commented that introduction of a new PDC bit has meant faster lateral drill times
    • Well performance also improving due to higher pump rates on the frac (up to 100 barrels per minute, more sand per gallon of water (3 pounds now), and tighter spacing of fracs.
    • Acreage up 53,000 acres this year, now at 345,000 net acres


  • Bossier Shale:
    • 122,000 net acres in what they think is the core
    • Thinking 5 to 6 Bcfe per well based on the results of others to date.
    • Planning to spud first Lower Bossier well 1Q10.


  • Eagle Ford Shale:
    • No big boomers to report.
    • Average IP came down slightly with the most recent set of wells at 8 MMcfepd (6.7 MMcfgpd and 220 barrels of condensate per day avg.)
    • Completed well costs now $5.3 mm, up from $5.0 mm last quarter due to longer laterals, increased frac stages - they'd mention this would happen.
    • Going forward, looking at 6 to 6,500 foot laterals, vs 4,300 feet on the last set of wells.
    • Acreage moved up to "over 225,000 net acres" from 210,000 net acres at last count.


  • Fayetteville Shale:
    • Still mostly non-operate activity.
    • Production was 88 MMcfepd net in August before Boardwalk went off line.
    • Also, expect to drill some deeper tests next year. Not exactly sure what they mean, (conventional sands?) will hear questions on this on the call for sure. 

Capital Budget:

  •  2009 crept up to $1.1 B. You just knew it would.
  • 2010 will be $1.45 B, also higher than previously stated.
  • Non-core divestitures planned. HK saying they have id'd $1 billion in non core assets (mentioned the midstream assets, Terryville, and WEHLU) ; Street will want to know level of interest so far, proposed timing, prices on each piece so will be listening for them to spill on the call.


  • 4Q09 Guidance revised up from a range of 525 to 535 MMcfepd to a range of 565 to 575 MMcfepd, and this excludes the loss of 30 MMcfepd from the Permian property sale.
  • This puts 2009 average production at 490 to 500 MMcfepd, up 75% vs 2008
  • 2010 Guidance was "30% to 40% over 2009 levels"
  • This is revised up to 43% growth to a range of 665 to 685 MMcfepd

Nutshell:  Big booming growth and falling operating expenses mean CFPS estimates for 2009 and more importantly for 2010 will be on the rise again. If I had one nit about the quarter it would be the Eagle Ford Shale performance in the most recent set of wells being off despite longer laterals. I'm sure this will be a hot topic on the call. At present, HK is trading at 8.2x 2010 CFPS est. of $2.94. This multiple will contract if the stock stands still as estimates will again be on the rise. While not cheap for an E&P name, it is cheap among the gassy, yet lower growth resource players list and its balance sheet is much improved since the start of the year. HK is largely hedged in 2010 but the extra volumes leave upside as prices rise next year. I continue to hold the common and multiple strikes in near month calls.

Conference Call: Thursday, 10:30 am EST.

ATPG Reports 3Q09 Results; Will Listen To Call

  • Production of 1.4 MMBOE vs 2.0 MMBOE in the year ago quarter
  • Revenue of $75 mm vs $86 mm expected
  • EPS of ($0.20) vs ($0.08) expected.

Conference Call: 12 pm EST


Odds & Ends

Analyst Watch:

  • Nada 

217 Responses to “Thursday – Gas Preview and Oil Inventory Review + Lots More Earnings”

  1. 1
    BirdsofpreyRcool Says:

    Levels at 7amET:

    · SP futures dn 1.5pts (off lows)

    · Euro Stoxx also off lows down 0.6%

    · USD (DXY) up slightly

    · Gold dn $3 to $1089

    · Crude dn 50c

    Today’s Top Stories & Catalysts

    · European stocks down 0.5% but have bounced off opening lows; Asia was a mixed bag with Japan/HK ending lower but China finishing at a fresh 3-mo closing high.

    · BOE leaves rates unchanged as expected (hit at 7amET); they bump asset buy program by gbp25B, also as expected (although some debate about whether they would leave QE unchanged). GBP/USD spikes higher following the decision. ECB now in focus; EUR trading slightly lower vs the USD ahead of the ECB decision out later this morning; widely expected to leave rates unchd but people are looking for ECB to talk about exit strategies.

    · Brazil’s government is considering additional methods to halt Real gains; is considering selling real-denominated debt in international markets among steps to battle a surge in the nation’s currency. Reuters

    · CRE update: the commercial real estate industry is expected to hit bottom in 2010; Owners of business properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs and workouts with their lenders. Report due to be published today by PriceWaterhouseCoopers and the Urban Land Institute, a real estate industry trade group and think tank. LA Times

    · Tech update: CSCO earnings were the big news of the night. EPS came in much better and revs also topped expectations (while revs exceeded plan, margins were the real bright spot). Tone in the press release and on the call re the state of the macro economy was pretty sanguine. On the call, Chambers cautioned Wall St analysts about becoming too bullish on the co’s earnings ests (i.e. trying to keep a lid on ests – “I just want to get ahead of ourselves”…”I just don’t want people to be modeling a normal year just yet – too many of our customers and competitors aren’t seeing the turn in business that we are”). Outside of CSCO, QCOM also reported earnings. The headline EPS was a miss, although on the call the company says that ex out a Korean fine payment, the results would have beat plan. The St seems pretty pleased w/the report and guidance (and keep in mind that expectations weren’t that high). There are more positive reviews of the new MOT Droid (the latest being in WSJ/Mossberg) – these reviews are one of the reason RIMM and PALM have traded poorly lately.

    · Retail SSS hitting this morning;

  2. 2
    BirdsofpreyRcool Says:

    TPH 1st take on HK earnings release —

    HK should be higher than $24! Q3 production beat, guidance increased 8% for Q4, and 2010 set +43%. $1.9B total capex covered by $1.4B in 2010E cash flow and $1B in midstream/E&P asset transactions. Eagle Ford liquids and possibly lower Bossier will add to our $47 NAV. ~120k net acres prospective for Lower Bossier at 5-6bcfe/well. In-line Q3 at 11c Q3 EPS (street/TPH at 12c/11c).

  3. 3
    bill Says:

    pxp actually beat but they way they present the numbers it looks like a miss

    this from tph

    PXP Q3 quick look ($27.12 – B) – Q3 beat on production, raised 2010 guidance midpoint +2mboe/d to 90mboe/d (now 13% y/y, was +10% y/y). 3 exploration wells Nov/Dec, will look to ccall for further commentary/guidance. 2010 capex range of $900mm-$1.1B (we were $900mm capex on $830mm cash flow). Please God, don’t let PXP talk up TRidge on CA Lt. Gov swapout (politics too risky to forecast, just let it happen). Q3 clean 65c Q3 EPS (street/TPH at 56c/53c) – beat us on lower costs, DD&A ticks up q/q.

  4. 4
    BirdsofpreyRcool Says:

    TechTrader is 55/45 SHORT today as the best odds day trade.

  5. 5
    PackMan Says:

    I have been shorting some SPY pre market; covered some; some will ride.

  6. 6
    bill Says:

    pxp talking davy jones and blueberry..sounds promising

  7. 7
    zman Says:

    Bill – Blueberry Hill should have results by now, any reason given for the delay?

  8. 8
    BirdsofpreyRcool Says:

    EXXI upped at Pritchard to $3 PT

  9. 9
    BirdsofpreyRcool Says:

    Question… does anyone care about Pritchard anymore? They used to be pretty good… don’t know them now. Any comments?

  10. 10
    bill Says:

    comments from pxp—

    50 ft of pay in sidetrack 2 of davy jones, sounds like they will do another well

    Blueberry hill revenue to hit q4 next yr

    25 to 75 type wells

    jim bob worlds greatest geoligist

    chk has 51 rigs running in haynesville,pxp has 20 % of this

  11. 11
    zman Says:

    Bill – thanks, just jumped on call. They said revenue is a sure thing on BB Hill? So they are calling it a discovery?

  12. 12
    reefguy Says:

    ioc-cc. will log well in 184′ at about 7450′- have taken cores in two intervals with big P&P. Have over 1200′ of gross pay in borehole

  13. 13
    BirdsofpreyRcool Says:

    HeadTrader thinks the morning rally will sell off, then we will drift higher into the afternoon slowness, ahead of tomorrow’s Jobs #

  14. 14
    bill Says:

    11 — >So they are calling it a discovery?

    he didnt come out that directly..flores tends to rambles to questions and i thought i heard that he expects rev from blueberry “late next yr”

  15. 15
    zman Says:

    Group not acting right. HK not reacting to upgraded guidance. People don’t like the extra spending it seems. Will wait for call.

  16. 16
    BirdsofpreyRcool Says:

    z — mrkt never likes it if you plan to make up part of your next yr’s capex with asset sales. But, i think you pointed that out earlier….

  17. 17
    zman Says:

    HK – my sense is it clearing out some smallish sell orders in a weak group. WSJ headlines as usual were focused on the wrong numbers, and botched the revenue comp. So you get some selling on the “miss” and then you get some pile on selling.

    BOP – agreed.

  18. 18
    BirdsofpreyRcool Says:

    HK sure knows how to thwack their shareholders upside the head. It is a rather exhausting stock to be in… think the upside it worth it, but as much cash flow as they have, just wish they would dial back on the “more, More, MORE” factor and stick to cash flows for a while. I mean, you can sell assets QUIETLY, then redeploy that elsewhere. Why scream it out loud? Unless it’s mandatory capex, to hold onto leases…

  19. 19
    zman Says:

    re 18. Yep. I’m going to be patient with it.

  20. 20
    BirdsofpreyRcool Says:

    re 19… LOL… i HAVE to be patient with it!

  21. 21
    PackMan Says:

    covered all SPY shorts (even thought think we may end lower); been buying HK stock on selloff.

  22. 22
    zman Says:

    PXP call ending.

    GDP – before anyone asks, I went over them. Just about fell asleep. Won’t be on that call.

  23. 23
    zman Says:

    CLR call in 15 minutes. Solid results, mundane operations update, more expensive name and its off more than the group.

  24. 24
    BirdsofpreyRcool Says:

    FWIW, i do think HK is a good buy down here… you just can’t complain about the volatility that comes with that territory.

  25. 25
    BirdsofpreyRcool Says:

    Not that anyone is complaining about it… just a “note to self,” sort of statement.

  26. 26
    BirdsofpreyRcool Says:

    PackMan — good snag on those HKs.

  27. 27
    Jerome Blank Says:

    HK is currently trading right above major P&F trendline support at $22-$23, HK holds on to its buy signal until a print of $21, also the daily 200 day moving average is right at $22 providing add’l support…if bullish on the stock this is a classic buy zone, stop below $21

  28. 28
    zman Says:

    APC, WLT, and SLB calls slowing coming back from the dead.

  29. 29
    BirdsofpreyRcool Says:

    thank you, Jerome. Your insights are extremely helpful in bracketing the Volatility Zones and keeping the bigger picture in focus.

  30. 30
    zman Says:

    CLR started

  31. 31
    elijahwc Says:

    Update on Chinese “Going Out” in the GOM from Rigzone.com. Its done.

    Statoil-CNOOC Deal Opens U.S. Gulf to Chinese Oil Cos

    In its third quarter report, Statoil confirmed that it has signed an agreement with China’s CNOOC for a number of stakes in its Gulf of Mexico (GOM) leases. Significantly, the deal opens the U.S. Gulf of Mexico to Chinese oil companies for the first time.

    In the farm-down agreement with the Norwegian oil firm, CNOOC will secure equity stakes in four GOM fields in exchange for bearing some of the fields’ development costs.

    China’s largest offshore oil and gas producer by capacity, CNOOC will acquire a 20% stake in Tucker and a 10% stake in Logan, 10% in Cobra in the Alaminos Canyon and 10% in Krakatoa in the Mississippi Canyon. Both the Tucker and Logan fields are situated in the Walker Ridge area of the Gulf of Mexico.

    “This type of cooperation is very common. Through that, the two companies can make full use of each other’s advantages, share risks and profits,” CNOOC spokesman Xiao Zongwei told Dow Jones Newswires.

    Additionally, Statoil spokesman Kai Nielsen revealed to Dow Jones that the leases up for grabs to the Chinese oil major were acquired in the 2007 and 2008 lease sales with Statoil securing a 100% working interest in the fields.

    “In the Gulf of Mexico, it is customary to optimize the portfolio and spread risk involved in exploration drilling efforts,” Dow Jones quoted Nielsen as saying.

    Neilsen also noted that Statoil retains operatorship of all four fields and that the farm-down agreement did not signal a shift in its Gulf of Mexico ownership, Dow Jones reported.

  32. 32
    zman Says:

    S&P having trouble with yesterday’s highs.

  33. 33
    BirdsofpreyRcool Says:

    The equity mrkt may be struggling to understand HK’s earnings… but the bond mrkt gets it. HAWK 7 7/8s up a point (to 102 offered) on the earnings report. A point is a big move on a bond.

  34. 34
    bloodystupidjohnson Says:

    So far, at least with the energy names, if you bought the options, hoping for an earnings beat, then you have come a up a cropper. Even with earning beats, those stocks have gone down.

  35. 35
    bill Says:

    market up 140 and im down waaaaaaaaaaa

    looks like no one likes the ng companies

  36. 36
    zman Says:

    BOP – keeping an eye on it a little more than normal myself, buying on volume off the lows, call will be key, will be surprised if someone doesn’t ask how much will be enough when it comes to outspending CF to grab acres and drill so much with gas prices so low. They actually could have kept Capex flat in 2010 with 2009 levels and gotten all of their Haynesville acreage into HBP by mid year 2011. So why increase the drilling budget now with the strip where it is. Also, will be good to have new president on the call. I have my doubts it goes positive today. Could be some upside for it when they talk about some ?s I have on the E.F.S., also when they talk about potential in the L. Bossier.

    CLR going fine, but once it was clear on direction it was pretty sunk for the day as well. No action from me as I don’t think it makes a big move from here. Solid results, just a bit pricey here.

  37. 37
    zman Says:

    BSJ – yep. Some quarters it works that way.

  38. 38
    elijahwc Says:

    In the FWIIW & OT dept: I recently installed Windows 7 over Vista on a highly problematic Toshiba. Much faster, cleaner, and a less frustrating experience. And without exception all “non-shelf “ works. I can’t believe I’m saying this but a SHOUT OUT to MSFT.

  39. 39
    zman Says:

    Bill – I know what you mean but I don’t look at that way. I just have to win more than I lose. Not every day. Not trying to be trite but trying to win on all the up days forces me to think differently about my positions than I otherwise would.

  40. 40
    zman Says:

    RE “on a highly problematic Toshiba” … is there any other kind?

  41. 41
    bloodystupidjohnson Says:

    No critism of you Z, general observation, that until good news is shown to be rewarded in the stocks, it might be good to lie low for awhile. There is no rule that one must play every hand.

  42. 42
    zman Says:

    BSJ – understood and feel free to criticize. I have fairly thick skin. Although, since I’m just telling you all what I do, realize that you are kicking a guy who also just took a drubbing 🙁

    Gas in 30 seconds, switching to HK call.

  43. 43
    VTZ Says:

    BOP – I’m thinking of buying a convertible bond fund. Do you have any opinion about that market as a whole now relative to investment grade and junk bonds?

  44. 44
    BirdsofpreyRcool Says:

    z — #36, agreed. Well put. Wish HK would slow down on the development and keep it within cash flow. That’s still a huge YoY gain… and what they don’t drill this yr, adds to next, at (presumably) higher prices. Why try to drink the entire punchbowl in the first hour of the party, is beyound me. And reeks of greed or stupidity or BSD-syndrome. Anyway, love HK’s acreage position, but don’t like the constant pushing of the capex envelope… that said, i own it.

  45. 45
    zman Says:

    29 Bcf, just below consensus

  46. 46
    zman Says:

    Gas leaping on the number.

  47. 47
    zman Says:

    BOP – flipside is, 70% hedged at just under $6. If gas goes $8 by end 2010 you have some pretty big upside to close the Capex / CF gap. … of course, they’ll just spend it.

  48. 48
    BirdsofpreyRcool Says:

    VTZ — thank you for asking. But there is a convertible bond EXPERT on this board… maybe we can get him to answer your question.

    IMHO, there are some good junk bond funds who also own a significant chunk of converts… i like those, as they can dial up and back, between straight bonds and converts, as the relative value dictates. But, would love to hear from the expert here…

  49. 49
    zman Says:

    Energy stocks watching oil it seems which is stuck down 40 cents all day. Weird trading there. Generally with dollar off and market up this much you can count on a crude rally of a buck or so. The fact that its off is putting the kibosh on the E&P party.

  50. 50
    zman Says:

    Eli – 43 is for you.

  51. 51
    zman Says:

    Operator still queuing callers for the HK call. People in background yelling something about yachts and skiing.

  52. 52
    VTZ Says:

    Woops, sorry Eli. Would appreciate any comments you have.

  53. 53
    PackMan Says:

    BOP / Jerome / HK … good stuff. Sold em all at 24; bought em back below 23.5, as low as 23.25.

  54. 54
    zman Says:

    HK CC Notes #1

    Production over guidance at 512, would have been 519 MMcfepd were it not for curtailments.

  55. 55
    zman Says:

    HK CC Notes #2

    $1.1 B in 2008 capex

    About same in 2009

    2010 $1.45 B – almost to the level of their 2008 original budget.

  56. 56
    jat Says:


    Any thoughts on CNQ? They missed prodn this quarter b/c of Horizon, saying that they’ve had equipment failure in ore preparation, naptha recovery, sulphur, etc. Should be a one-time with the exception of the clay mix from the mine benches, which will resolve over next two quarters. I know you prefer COS for the straight crude leverage, but they lack the growth you probably get here if the ramp pans out. Anyway, would appreciate your opinion.

  57. 57
    zman Says:

    HK CC Notes #3

    Even with the constrained 2009 budget they were able to stay on track with land capture into HBP status in the Haynesville

    and derisk the Haynesville

    and grow the Fayetteville

    Today adding the Bossier Shale – call this play #4, adding 4.1 Tcfe net to them

    They put potential reserves at > 30 Tcfe

    Proved at year end 2008 was 1.4 Tcfe

  58. 58
    zman Says:

    HK CC Notes #4

    Divestiture proceeds in 2010 expected to be at least $1 B.

    Reiterating No Need For A Deal

  59. 59
    zman Says:

    S&P through yesterday’s highs

    Crude about to go green

  60. 60
    BirdsofpreyRcool Says:

    Banks love HK… throwing money at them

  61. 61
    PackMan Says:

    BOP … yesterday, ran into a certain as een on CNBC WS global economist; had an interesting discussion.

    bottom line – view is disaster (depression) averted; recovery will be moderate; sales will likely disappoint (moderately ok; but easy comps); consumer stressed; fed out of ammo; S&P reasonably priced here IF you have LONG TERM perspective and believe 70 EPS 2010.

    Think I got that right.

    Nothing particularly earth shattering ther.


  62. 62
    zman Says:

    BOP – cash flow leverage to higher gas prices is increasing as they keep whacking LOE down on a per unit basis. Getting rid of Permian helped that more.

  63. 63
    bill Says:

    hk must be very busy as they dont even have slides for todays call

  64. 64
    BirdsofpreyRcool Says:

    PackMan — thanks for sharing. I am not a Frothing Bull… but, I think the market will trend higher over the next couple of years. I think the risk is trying to play from the short side. Doesn’t mean the mrkt won’t go down, but if you’re buy-and-hold, i would not be a buyer-and-holder of any ultra-short ETFs here.

    Can’t think of a better hedge and investment than energy, right here, right now. Daily volatility aside, think anything i buy here, i will be very happy to own in a year, 2 yrs…

  65. 65
    zman Says:

    HK CC #5

    2008 spud to spud 79 days
    2009 first half 69 days
    3Q09 68 june, 61 aug, 47 sept

    2010 – 42 day average expected

    tighter curves, rotary steering, proprietary PDC bit,
    better well performance – due to frac design changes listed in the post.

  66. 66
    bloodystupidjohnson Says:

    I read somewhere that the predictive power of the absolute rig count is lessening. Reason: now drilling better wells, use of multi well pads, and well drilling becoming more efficent (every come is touting how they are cutting drilling days per well).

  67. 67
    zman Says:

    HK CC #6

    30 day IP for 53 wells is 14 MMcfepd. Pretty strong.

    New acres are in Tier 1 Haynesville

    Lower Bossier – think it will be quite comparable to the Haynesville.

    Eagle Ford
    Drilling faster here too. Spud to TD was under 19 days.
    $2.3 mm for the rig
    $3.? for the frac
    7 – 15 stage fracs, performed as well as the previous 18 stage completions.

    They’re saying these are significantly improved rates over prior wells. Um, not sure I get that based on their prior releases. Must be missing something, this set looked lower on IP than the first wells.

  68. 68
    VTZ Says:

    jat – I’ll tell you a secret about the oil sands… reliability problems do not go away, especially for inexperienced producers. Shell for example, is still changing out major pieces of equipment from Base Plant (started up 5 years ago).

    Expect management to talk about a lot of “one time” issues. It’s the nature of the business. It’s all the more reason to give Suncor and Syncrude (COS) the premium. Look at Suncor still having fires and stuff, and that’s coming from an experienced operator. The mine is the trickiest part and I expect sustaining capital expenditures to be higher than expected if they intend to meet target production.

    In the long term, if I had to pick between Horizons and Voyageur/Fort Hills for growth I would go with Voyageur/Fort Hills because it’s better property and experienced operators.

    CNRL has no learnings and trust me that it’s not an easy business.

    Ultimately, my reasons for prefering COS right now are:
    -Dividend (which is probably due for an increase)
    -Experienced Operator
    -I don’t expect growth projects out of Suncor or CNRL in the near future (until prices stabilize over 100)
    -Even if they announce growth projects it will take ~3-5 years to bring into production depending on how much development they’ve done

  69. 69
    zman Says:

    HK Q&A #1

    Rigs will be posted later in the day on their website.

    Eagle Ford – oil drilling, not saying where it is (somewhere in northeast end of field), thinking $3.5 to $4.0 mm completed well cost, same type of well they’ve been drilling. Going from 2 rigs now to 4.5 avg rigs in 2010. Not sure when they test this. Question is permeability. Saying the Dimmit county comment for the oil in the pr is a typo. WTH?

  70. 70
    zman Says:

    HK Q&A #2

    Eagle Ford – had 1 well come in at 120 bcpd per million. That’s a lot of liquids.

    They expect that to go up as they move towards the northeast. Still very focused on their original acreage.

  71. 71
    zman Says:

    HK, GDP, CLR – all announced, no real kahuna wells in their pr’s and all down. Same yesterday for PXD, now up today. See this as a fleeting phenomenon.

  72. 72
    zman Says:

    Add DNR and IOC to that list. Release your 3Q numbers, get drilled.

  73. 73
    zman Says:

    Still listening to HK call.

    Announcing for tomorrow: SD, BEXP, EOG, KOG.

  74. 74
    zman Says:

    Raymond James today: They thought it would be up too …

    Petrohawk (HK/$24.24/Outperform) misses on higher costs; but production guidance raised significantly. Petrohawk announced clean 3Q EPS of $0.11, below our estimate of $0.13 and a penny below the Street of $0.12. Production of 513 MMcfe/d beat our forecast by 2%, but operating costs of $1.26/Mcfe came in 4% above our expectations leading to the bottom line miss. T he real news affecting the company’s short-term outlook is that management is upping its 4Q production guidance 7% to ~570 MMcfe/d despite the fact that they sold Permian assets, which were producing ~30-35 MMcfe/d. Bottom line: With updated 2010 organic production guidance increased to ~675 MMcfe/d, implying 43% pro forma growth over 2009 (vs. our forecast of 30% growth), the stock should look through the earnings miss and outperform group today.

  75. 75
    zman Says:

    HK Q&A

    Said they are waiting on EOG to release data on their E. Texas Haynesville JV wells (4 of them so far with EOG), saying they are thinking it is comparable to what they are seeing in N.W. Louisiana. EOG reports tomorrow. Good bet we hear about those wells in EOG’s pr tonight as they deferred talking about them on the last call due to acreage acquisition efforts. HK just said they are still buying acreage around there but there is not much left available. Time to talk EOG.

  76. 76
    zman Says:

    adding to 75, Floyd said we’ll let the operator disclose those results and then added that you should hear something soon. Again, EOG reports tomorrow.

  77. 77
    zman Says:

    All the shale player calls point to one thing, more high strength proppant being consumed in each well. Probably not a bad thing for CRR. There was awhile back a lack of need for the ceramic on a cost / benefit basis, but this quarter they’re all saying they are using more of it.

  78. 78
    zman Says:

    HK Divestiture comments – gotta wait for it.

    Hawkville Services – EBITDA is exploding. Saw in the pr they had 6 other customers (aside from HK gas) and are adding customers still. This is the gathering, processing arm of the company.

  79. 79
    zman Says:

    HK Call over, stock at 23.35.

  80. 80
    zman Says:

    Any of you Haynesville drillers care to comment on your thoughts on Hayensville completed well costs. HK saying go forward is $8 to $9 mm. Someone asked about CHK’s comment yesterday that costs are down to $6mm. HK said they would not want to cut corners on these high pressure wells.

  81. 81
    PackMan Says:

    BOP; anytime; I can’t predict the market of the future; but I am still short biased overall for now due to consumer; credit; real estate; banks; Obama & Pelosi; etc.. I tend to agree about energy; and short ETFs; the latter are for trading; not for long term investing; decay will kill you.

  82. 82
    bloodystupidjohnson Says:

    For what its worth dept: I sometimes take out a few puts for insurance. Today, I have bought some puts to try to make money.

  83. 83
    elijahwc Says:

    43 48 -50 – Converts “opinion about that market” Answer: the premiums are back in and you want it the other way except for individual names. More on this later.

    On Funds:

    Convert Funds: I’m a deep value cheapskate (read “busted”) kind of guy and therefore can’t point to a specific fund as almost all publicly traded open and closed ends are driven by either the new issue market or price momentum. Think BOP’s observation on high yield funds going both ways is abetter play.

    And, the record of convert funds is just awful as this list will attest:


    Gun to my head and if momentum is your game then Calamos is your name although I would not put my money there as the funds are of sufficient size to be the market. In fact, I just plain dislike open-ends as I have no control of the maturity of the whole.

    The Calamos exception is in the closed-end funds assuming that you get a really big discount to NAV like in March of this year…..not now. And, whatever you do, do nothing with Nicholas Appelgate unless you want the William O’Neil ride of your life.

    Exception to the above on open ends is FPA’s New Income but it is a multi strategy value driven bond fund and not a true convert fund. But real good. In LA.

    The ugly truth about converts is that anyone you would really want to hire is to be found in the Hedge Funds community or in separate accounts.

    The best of these would be Howard Marks shop, Oak Tree in LA. They offer both of the above although the minimums are very high. On the other hand, I bet that they sub-advise to other investment firms where the cost of entry is much more reasonable.

    Still, you should buy your own!

    Every investor should always buy their own individual inventory and I would like to share with you why. It’s my very simple rule on corporates. “On every bond bought at par, all of the risk is on the downside should the credit fail.” So buy ‘em in the aftermarket after to credit or coupon has already been compromised.

    I would rather take the advice on individual issues (converts or straights), such as the EXXI’s down 15% from par with a double digit yield to worst, that, should the credit improve, management will be unable to take it from you except on your terms (minimum par) while paying a substantial rent check in interim.

    Four or five ideas like this each year and you will have control of the coupon, maturity, with a suitable discount to provide a margin of safety and if a convert, an option on the company’s future, and all on your terms. And one heck of a portfolio.

  84. 84
    zman Says:

    ATPG call about to start

  85. 85
    guru Says:

    Great instant and live CC analysis on HK. Do you think it is time to consider adding to a longer dated HK call? The ONLY negative appears to be the relatively higher cost of drilling wells at $8.0 mm (compared to say CHK)?


  86. 86
    bill Says:

    atpg call on now

    the ceo is a fan of Paul Harvey and gives his presentation in the his style

  87. 87
    bill Says:

    Now you know the Rest of the story!

  88. 88
    zman Says:

    G – I’m considering that now. I will probably do nothing on it today before the payroll # tomorrow. Unless I do a quick trade if it spikes lower.

    Bill = lol. Wonder if they will talk about TS Ida?

  89. 89
    VTZ Says:

    Thanks eli

  90. 90
    bloodystupidjohnson Says:

    Z, there is a definite seasonality in energy names. For example one of the best times to buy energy stocks is the end of Feb. 1. Do you buy that thesis, and 2. If you do, do you use it in your trading?

  91. 91
    zman Says:

    BSJ – Not really, no. Take a look at the monthly chart of the XNG. From July 2002 to July 2008 the gassy stocks, which are my primary focus traded in fairly linear fashion. Higher. We some seasonal spikes in winter but for the most part I try to figure out what gas is going to do (and oil) and then look at each company I’m in from the bottom up.

  92. 92
    1520sbroad Says:

    Z – what was the latest secondary price of HK shs? It was around $22.50 – $23 or so?

  93. 93
    bill Says:


    it could take 2 more qtrs to hook up the telemark wells. they said it come on late q1 or early q2

  94. 94
    BirdsofpreyRcool Says:

    elijha #83 — great discussion and advice. The only time i’m interested in converts is when they are busted. Otherwise, i’ll just buy bonds (income) and/or stock (upside). To buy converts at par is not a nice risk/return bet. Same thing with high-yield bonds (which are a type of “convert” in that there is always “equity risk” in a high-yield bond… whether you get adequately paid for that risk, is another discussion).

    There used to be a very good, smaller fund mngr in the HY space who could opportunistically buy busted converts and/or high yield bonds… Margaret Patel. She used to be at Pioneer… she is now at Evergreen. I haven’t followed her track record at Evergreen, but she did a phenom job at Pioneer. Maybe worth checking into, if you really want a fund… personally, i like buying the individual bonds/converts yourself. It’s more unique (credit) risk, but less timing and mngr skill risk. Funds have a way of locking in gains when you least want them to (at the bottom of the mrkt) and chasing returns when they are most overpriced (at the top of the market). As an investor, I like to drive the bus myself. As Elijha points out.

  95. 95
    elijahwc Says:

    Welcome VZ. Your money should not go unspent. Hold your nose and buy some WFCprL at 880 or better. 1,000 par issue to yield 7.5% which trades liquid on the NYSE every day. Conversion ratio is 32.0513. SO with the common(WFC) at 26.82 and the convert at 880 you get 8.6% for your rent check which they can’t extinguish unless they tender at par or offer a handsome exchange.

    Now for the gravy. With a 32.0513 conversion ratio this one is not that far out of the money. At 31.20 on the common this one goes in the money and I can assure you that the convert price will be +/- 1,150 at that time given the imbedded option premium. From there it goes ballistic until converted. Oh, and they will have to pay you the rent until then.

  96. 96
    zman Says:

    1520 – $22.86

  97. 97
    elijahwc Says:

    BOP – Margaret Patel – a blast from the past and a good one. Evergreen is also well seasoned.

    I will add one more, Dan Fuss at Loomis.

  98. 98
    1520sbroad Says:

    #96 – thanks – i had several different numbers floating around in my head.

    Wasn’t there talk at one point of HK doing an MLP of older acreage and then that was withdrawn in late 08-early 09. Does this divestiture accomplish the smae sort of thing. I anticipate similar structure in the divest as their Permian sale? Is that your take?

  99. 99
    1520sbroad Says:

    #97 – Dan Fuss – great guy, great manager. Does he have a convert oriented fund or just sprinkle them into his other funds?

  100. 100
    zman Says:

    ATPG – call going pretty well. Market just doesn’t care to buy names that reported today. HK pre call notes from others very positive. HK down 5%, GDP down 5%, PXP almost recovered, ATPG and IOC both down 4%. Rest of group green.

    1520 – sounds like a straight sale of assets, timing sounds split evenly over the year. In other words they don’t know yet. Also would not quantify hit to production, not sure if that’s factored in but it looks like it is. Note they raised 4Q guidance from the last guidance despite the loss of 30 MM/d from the Permian. Their Haynesville wells continue to outperform further from IP than people think. Small part of why gas production is not slipping as fast as we all thought it would by the way, along with those uncompleted wells being completed. The midstream company may get dropped into an MLP, not sure on that one.

  101. 101
    bill Says:

    the covenant release costs atpg an additional 48 m over the term or as they say 1 dollar per share. Interest on the bank line is over 11 % per year

  102. 102
    zman Says:

    Bill – what is the net add to ATPG when Telemark starts, wasn’t sure on the interest there now after all the deals for service cost reductions?

  103. 103
    john11 Says:

    Interesting..ATPG following this up with conference presentation.

    HOUSTON–(BUSINESS WIRE)–ATP Oil & Gas Corporation (NASDAQ: ATPG – News) CEO T. Paul Bulmahn will discuss ATP’s strategic future growth and will provide an update to the sail out of the ATP Titan at the Imperial Capital 3rd Annual Global Opportunities Conference in New York on Thursday, November 5th. Beginning at 3:20 pm ET a live audio webcast will be available at http://www.wsw.com/webcast/imperial2/atpg/ and at ATP’s website http://www.atpog.com. Presentation slides will be available at ATP’s website on November 5th. In addition to the presentation, Mr. Bulmahn and Mr. Brian C. Nelson, VP of Finance, will also conduct one-on-one meetings on November 5th that can be requested at the conference.

  104. 104
    zman Says:

    Analysts displaying a distinct lack of sack with regard to HK post call. Seeing nothing out of several shops that were bullish before and after the numbers (but before the stock fell on the open).

  105. 105
    1520sbroad Says:

    #100 – did HK talk about the rates on Haynesville wells after IP on the call? Is there a curve floating around in one of their presentations?

  106. 106
    BirdsofpreyRcool Says:

    z — was talking to a very savvy hedge fund mngr for the last hr or so… he has owned HK in the past and while we were taking, he was busy selling RRI and swapping into HK. He also pointed out that 80-90% of all trading these days is computer-driven. So, he doesn’t put much behind the downdraft in HK… at this point. We both agreed that spending much time below $22.86 would be a bad thing. But, as i mentioned, he was busy buying HK around 23.02.

  107. 107
    RMD Says:

    Thoughts listening to conf. calls this week: stocks are suffering from nothing new. Costs down but leveling, rising IPs have leveled off, no new plays except Bossier tests in ’10. Excitement of sexy shale plays largely discounted, and sexy stocks are expensive on an EV/daily production or EV/proven reserve, so the growth may be in the stocks.
    My answer is to go up the risk scale to the no-production, no-reserves plays whick will drill soon. KOG valuation up because is currently drilling and is valued at $7m /acre. BEXP is $6m/acre. (Market prices seem to be around $5,000/acre in the Bakken.) WLL is very cheap/acre but well known, so I kept my quality down with AEZ at $1m/acre with mgt saying a JV is immenent. Humbly FWIW.

  108. 108
    zman Says:

    BOP – they said of the 53 wells in the Haynesville that have 30 or more days of production, the 30 day average is 14 MM/d. Their last presentation should have curves from IPAA, will check.

  109. 109
    zman Says:

    BOP – neither do I, just would like to see an analyst who liked it before it was down step up to the plate instead of wallowing in their hideyhole.

    RMD = ha, ha. Thanks.

  110. 110
    bill Says:


    they on record as saying 2010 y-o-y volmes will double and there is a presentation out there that shows the monthly anounts.

    It will be a hockey stick as little will come in in q1, most in q3 and q3

  111. 111
    bill Says:

    meant to say q3 and q4

  112. 112
    jat Says:

    VTZ–Thx a lot for the color on oil sands. I certainly agree that the ramp is always longer than anticipated. I remember this being a problem for all the operators during ’07 and ’08, and even SU only got to a place where they can deliver as of this year, with Firebag being relatively robust. My hope for most of the Canadians is that 2010 marks a sweet spot in terms of commodity and op costs flattish with this year’s deflated levels.

    In terms of our large-cap oil, we’ve already been in SU/OXY since early July and we’ve been trading around the SU core since then. But I’ve been taking a closer look at CNQ during this recent correction. The 20% haircut, the 4.9x my ’10 EBITDA, the 7% growth budgeted for next year, and the ability to have FCF even in Q109– that all impresses. (This EBITDA is compared to COS-U at 11x and SU at 5.5x– I understand why there should be a discount, completely get the relative oil sands mix between them all, but do appreciate that CNQ is doubling Horizon over the next 4 yrs). So that’s how I’ve been thinking about it.

  113. 113
    BirdsofpreyRcool Says:

    RMD — AEZ is on a tear today… any reason? I thought they might have reported, but don’t see any PR. What’s the rippage due to today?

    Are you moving the mrkt there??

  114. 114
    zman Says:

    BOP – very close to buying more of it at $23.

  115. 115
    elijahwc Says:

    #99 He runs a general multistrategy bond fund, the Loomis Sayles Bond Fund. He is quite willing to go to where he belives the total return will be, so he’s not a closet indexer and therefore exactly the type of manager you want. Type and weighting of converts in the fund vary given his perception of the current enviroment but he has been known to use a lot.

  116. 116
    1520sbroad Says:

    #115 – thanks. I was familiar with his investment grade fund – i’ll check that one.

  117. 117
    zman Says:


    HK – Added (50) HK $25 November calls (HKKE) for $0.40 with the stock at $23.10. See post and comment section for a litany of reasons.

  118. 118
    cargocult Says:

    EXXI is seeing some interest today.

  119. 119
    baylor3217 Says:

    Picked up a relatively small hk position at 22.99

  120. 120
    PackMan Says:

    BOP – 106 – good color on HK thanks.
    I just figured the options traders got their 5%; now it can go back up.
    As for the analysts; we’ll probably hear from them tomorrow after they get their clients loaded today also.

    I bought some more on this dip also.

  121. 121
    1520sbroad Says:

    #119 – ditto @ $23 then i sold Z some of his HKKE

  122. 122
    zman Says:

    UUP – trading halt, waiting on SEC filing to sell more units.

    Isle – thanks for that. I’d be surprised if I can’t buy more lower later today. S&P probably won’t hold this rally into the close.

    Has Goldman come out with a new payrolls number yet? Gotta figure they will before the close.

  123. 123
    VTZ Says:

    jat RE 112 – In terms of valuations, I agree that CNRL looks fine and I don’t have anything against them but for a company like that I would rather own Suncor.

    While the rampup will increase production I don’t expect Horizons 2/3 to be coming any time soon. It will 100% not be ready within 4 years.

    Keep in mind that in a rising oil price environment COS is poised to increase their EBITDA at a higher rate than CNQ due to the pure leverage as opposed to the companies with other assets.

    I still see COS being more expensive on a EBITDA basis but I would expect it to be more like 7-7.5x compared to ~5.5x for CNQ.

  124. 124
    BirdsofpreyRcool Says:

    cargo #118 — i think EXXI is trading up on BBhill whispers/statements. Thing is, EXXI is not in that well… and whether it comes up a producer, or not, has little (to no) informational content about the two ultra-deeps that EXXI is in (Davy Jones and Blackbeard).

    Or, maybe people really do listen to Pritchard… who just raised their PT to $3 and risk-adjusted NAV to $5.

  125. 125
    PackMan Says:

    I will guess that GS calls for a 10 handle on unemployment tomorrow.

  126. 126
    PackMan Says:

    sold most of my HK on this latest run; keeping some; sold some 25 calls against part of that; will buy more if it dips.

    IF HK can blow past 23.75 then its up and away.

  127. 127
    zman Says:

    Hear ya on the 10 handle on unemployment, wondering though if they are over or under the current payrolls number of -150K.

  128. 128
    zman Says:

    BEXP walking up into earnings tomorrow. Insert your dubious comment here.

    SD pretty flat. All depends on what they say about Crusader. I will not add more options in front of the call.

  129. 129
    VTZ Says:

    RE 123: Keep in mind Syncrude has debottleneck potential as well so the near term growth is likely similar beyond the rampup due to Aurora South.

    Where CNRL does have an advantage is having the flexibility to invest in insitu projects that are profitable at lower prices.

  130. 130
    bloodystupidjohnson Says:

    Concerning BEXP – that up into earnings, does that mean we should be buying puts? – lol

  131. 131
    zman Says:

    Re 130 – I added the second sentence just for you.

  132. 132
    zman Says:

    BEXP – Seriously, not sure what they have up their sleeve from a well completion standpoint, suspicion is no new news there but a couple of more completions late this month. Guidance? Maybe, maybe not. I think they will talk about their accelerated drilling program and proving up Rough Rider. But do they guide for 2010…dunno.

  133. 133
    PackMan Says:

    130 … probably !

  134. 134
    PackMan Says:

    133 – and I say that without knowing anything about the facts ! Just a comment about pre and post earnings price action.

  135. 135
    isleworth Says:

    Consensus Goldman Forecast:

    Non-Farm Payroll Employment Oct
    last month -263,000 Current Consensus-175,000 GOLDMAN-200,000

  136. 136
    zman Says:

    Thanks much Isle. Mother GS laying down the lay at the 11th hour again.

  137. 137
    isleworth Says:

    Goldman at consensus on a 9.9% Unemployment rate and average earnings up 0.1%

  138. 138
    choices Says:

    Strange-UUP up >2% with DX just about flat.

  139. 139
    zman Says:

    Wondering if I have a bad quote, showing a sudden, sharp spike in the dollar index, anyone else see that?

  140. 140
    VTZ Says:

    I see 75.75

  141. 141
    zman Says:

    Choices, yeah, that’s what I was looking at, must be related to their SEC filing and not the dollar itself.

  142. 142
    choices Says:

    Just saw Market Watch news item-DeutscheBank is out of new shares and cannot issue more until clearance from SEC-hence artificial trading.

  143. 143
    zman Says:

    Thanks for the RJ piece on PXD, confirms my thinking there as to how the Street will look at them in the coming year. Favorable following a 4Q trough in production.

  144. 144
    zman Says:

    WLT trying to get back above pre announcement levels from Oct 20.

  145. 145
    isleworth Says:

    RE UUP – Spike reflects that demand is not able to be filled without issuance of more shares(forthcoming). I just sold 50% of my UUP long.

  146. 146
    zman Says:

    Just noticed MMR popping. I really didn’t hear anything definitive on Davy Jones, did you Reef?

  147. 147
    elijahwc Says:

    Z – On the GDR call, did they mention this: Is it even important?

    Cubic Energy, Inc. Announces Result of Goodrich Operated Horizontal
    Haynesville Shale Well
    DALLAS, Nov. 5, 2009 (GLOBE NEWSWIRE) — Cubic Energy, Inc. (NYSE Amex:QBC)
    (“Cubic” or the “Company”) announces a twenty-four hour peak rate from its
    non-operated Plants 26H-1 well at 15,300 Mcfe/day, on a 24/64 inch choke, with
    7,000 pounds of flowing pressure, producing from the Haynesville Shale
    formation. The Plants 26H-1 was spud on July 20, 2009 by operator Goodrich
    Petroleum Corp. (“Goodrich”).
    The Plants 26H-1 is located in Section 26, Township 14 North — Range 16
    West in the Bethany Longstreet Field in DeSoto Parish, Louisiana. Cubic has a
    10.15625% working interest in the well.

  148. 148
    isleworth Says:

    On November 3, 2009, PowerShares DB US Dollar Index Bullish Fund – UUP, a series of PowerShares DB US Dollar Index Trust, announced in a Current Report on Form 8-K that 6,600,000 of its Shares registered with the Securities and Exchange Commission were available for purchase by the Fund’s Authorized Participants. As stated in its current prospectus, the Fund creates and redeems Shares in blocks of 200,000 Shares called “Creation Baskets” and “Redemption Baskets,” respectively. Only Authorized Participants may purchase or redeem Creation Baskets or Redemption Baskets. As of November 5, 2009, the Fund issued all of the remaining Shares to its Authorized Participants. As a result of these issuances, the Fund will temporarily suspend the issuance of additional Creation Baskets until the registration statement on Form S-3 which was initially filed on November 2, 2009 and registers an additional 100,000,000 Shares of the Fund has been cleared by the SEC, the Financial Industry Regulatory Authority and the National Futures Association. The Fund will issue a subsequent Current Report on Form 8-K to announce the effectiveness of the Registration Statement and its ability to resume offering Creation Baskets to its Authorized Participants. The suspension of the issuance of Creation Baskets has no effect on the ability of Authorized Participants to redeem Redemption Baskets.

  149. 149
    zman Says:

    Eli – got your email. Too kind.

    On the Cubic well, don’t know, played hooky from the GDP call. Will check. Haven’t looked at Cubic in awhile.

  150. 150
    skimo Says:

    Anybody have anything to report on LINE? They missed estimates but seem to be holding price.Any guess on direction moves. Seems to me div will protect downside.

  151. 151
    bill Says:


    atpg another presentation

    its worth listening to just to hear the ceo do his paul harvey thing

  152. 152
    bill Says:

    128 sd

    i dont expect them to say anything on crusader..situation too delicate

    they have huge hedges and good news next year with the oxy plant

    The market will probably slam them just like they slammed all the others

  153. 153
    zman Says:

    Ski – re LINE

    Quarter was fairly uneventful. I wrote it up yesterday as follows:

    The 3Q Numbers:

    * Production of 217 MMcfepd vs mid point of guidance of 212 MMcfepd. This is off from 219 in the second quarter but 5 MMcfepd remains shut in voluntarily due to low prices.
    * Costs of just under mid point of guidance
    * EBITDA of $142mm, above guidance and in line with the Street at $142 mm; coverage ratio was 1.09x, higher than forecast of 1.01x.


    LINE expects to have 10 MMcfepd of shut in capacity at Granite Wash by year end as completions are deferred.

    The company raised its hedge prices for 2010 and 2011 by trading in some 2012 to 2014 hedges:

    2010 and 2011 are now hedged at $92.25 oil and $8.87 gas. The company is roughly 50/50 oilvs gas and it is still hedged 100% for both 2010 and 2011.

    Nutshell: I continue to hold the units on this biggest and in my view best of run E&P MLPs.

  154. 154
    zman Says:

    Bill – Time on the competitive bid on the deal was supposed to run out first week of November. I’ll go back and check my notes from their call but I’m pretty sure that if there wasn’t another bidder higher than them by this week than it was there’s for the taking.

  155. 155
    skimo Says:

    I’ve got a good chunk of LINE and agree re mgt and the hedges/div coverage

  156. 156
    zman Says:

    From September 23rd post:

    “Should know if they have it or not within 40 days.”

    So 7 days of September plus 31 for October … = time should have run out, could be business days I guess but didn’t sound like it at the time.

  157. 157
    zman Says:

    Ski – I really expect to see them pick off an accretive, probably oily acquisition this year and then up the distribution by maybe 5 cents per quarter.

  158. 158
    zman Says:

    Link to my SD comments when they announced the Crusader deal:


  159. 159
    Popeye Says:

    HK in danger of going green.

  160. 160
    zman Says:

    Popeye – for shame, lol. Shhhhh.

  161. 161
    Popeye Says:

    Z, big shootout at Ft. Hood.

  162. 162
    elijahwc Says:

    In an effort to make sure no ETF stone remains unturned, FaithShares has filed with the SEC to launch a family of five ETFs designed to reflect the tenets of the largest Christian denominations in the U.S.

    To which the always insightful and funny Howard Simons retorted:

    “on religious ETFs: They do have the ultimate in forward-looking statements, don’t they? ”

    Hope I don’t get flamed for this…..just though it was funny.

  163. 163
    bill Says:


    Great write up

    It such a good deal, crusader shareholders are in a dither about it

    Amazingly, the company went into chap 11 for a measly 5 m issue and lost control of the situation

    sd will also doubles its production over the next 2 years with the new oxy plant coming online

  164. 164
    isleworth Says:

    re 117 – Very nice call on the HK options Z ! Almost doubled in two hours! 🙂

  165. 165
    zman Says:

    Eli – the flames come later, lol. And I know I’ll get flamed for that one.

    Bill – I’m with you. After adding that first set of calls I decided I’d own the shares as well. Maybe I’ll start writing calls against that position. Last time I did that the stock was at $6 and I promptly got taken out of a piece.

  166. 166
    zman Says:

    Gotta go grab one of the interns. I’ve got soccer practice tonight so any earnings comments will be later on.


  167. 167
    RMD Says:

    LINE at 1.1X coverage and VNR at 1.8X coverage with no thought of raising distribution because of all the asset sales coming in ’10: $1B from FST, $10B from COP…the list goes on and on. Investment bankers dream as MLP prices are high enough and mature production low enough to do accretive deals here.

  168. 168
    bill Says:

    sd numbers are out

    quick glance looks like 16 cebts vs 15 est

  169. 169
    isleworth Says:

    SD trading down 5% in AH

  170. 170
    bill Says:

    sd little vol low is 10.07 in ah bid 10.07 ask 10.19

  171. 171
    BirdsofpreyRcool Says:

    GEOI earnings out…. 1st impression = nice numbers.

  172. 172
    zman Says:

    Doing a flyby:

    SD numbers generally in line at the bottom line.

    They cut 2009 volume guidance slightly and established non-thrilling 2010 numbers.

  173. 173
    isleworth Says:

    SD now $9.90 bid….ouch!

  174. 174
    PackMan Says:

    Arggghhh .. had to leave for a meeting at 2:30. Boy did I misplay HK today. Made some good coin; left a lot on the table !

    But still, thanks Z …. good coverage of HK fundies !

  175. 175
    isleworth Says:

    KOG – Kodiak Oil & Gas reports Q3 EPS of $0.00 vs $0.00 First Call consensus; revs $3.74 mln vs $3.91 mln First Call consensus

  176. 176
    PackMan Says:

    But I did briefly meet Hal Steinbrenner in front of the Regency Hotel (no, I don’t know him; but saw him there and just said hello and congrats).

    I would rather have more HK $$ !

  177. 177
    zman Says:

    KOG – that’s a pretty big EBITDA number of $1.8 mm vs $1 mm expected. Silly statement but they’re just getting started, will have a quick look.

  178. 178
    BirdsofpreyRcool Says:

    KOG – nice positive EBITDA surprise… wasn’t expecting very much, but pleasantly surprised.

  179. 179
    zman Says:

    KOG 5 cents CFPS vs 2 cents expected. Don’t think the numbers matter that much but at least they aren’t missing on the bottom line.

  180. 180
    BirdsofpreyRcool Says:

    agreed ono KOG… numbers don’t mean that much right now. But nice that they don’t suck either!

  181. 181
    BirdsofpreyRcool Says:

    KOG — if anyone sees a KeyBanc note on the quarter, would love to hear what they say. The whisper is that Key wants to take KOG’s NAV up to $4 by 12/31/09 and $6 by 12/31/10

  182. 182
    PackMan Says:

    Lot of volume on HK today; looks like those upgrades or whatever broker commentary will be released tomorrow got communicated to clients about 1 pm (based on price / volume action)

  183. 183
    BirdsofpreyRcool Says:

    SD …. a/h no likee-likee earnings. If SD trades (for some reason) with an 8-handle, i would be all over it. It’s like HK with a $22 handle…

  184. 184
    BirdsofpreyRcool Says:

    EOG coming across with tape with some pretty big earnings…

  185. 185
    PackMan Says:

    BOP; the question is should one bid AH tonite in 9.50 area; or look for cheaper entry tomorrow ?

  186. 186
    BirdsofpreyRcool Says:

    PackMan — for SD? hmmmm…. i usually get a/h trading back-asswards. But here’s what i think… mrkt (Dow) is up over 200 pts today. Tomorrow is a big jobs number. If unemployement comes in with a 10-handle, or there are more than 175k jobs lost, there could be some selling pressure at the open. SD’s conf call starts at 9 EST… and i don’t think SD typically rallies hard, during a conf call. (z, help me out there…)

    Anyway, I would take the time to thoroughly read the SD PR, then get ready tomorrow if either the mrkt sells off, or SD sells off. And if you don’t get it tomorrow… well… volatility has been your friend, lately. You’ll get another chance.

    Just a few trading thoughts…. I don’t mean to tell anyone what to buy or sell. Just share what I am thinking about doing myself.

  187. 187
    PackMan Says:

    I know; thanks; good insight.

    I think market will sell off tomorrow regardless FWIW….

    Just because. This 1066 area is a very strong resistance level and there really is no reason to party on …

  188. 188
    BirdsofpreyRcool Says:

    Doesn’t hurt to wait. And if the mrkt zooms tomorrow, well… i have other stuff i’ve invested in.

    I am in the Bull Camp. Credit Market is open for business and M&A and corporate buybacks will take stock out of the mrkt… if the individual doesn’t want to. Even IPOs are back in fashion (see C’s announcement about Primerica a/h). BUT, mrkts climb best, when they climb a Wall of Worry. So, sell-offs (some lasting days) come with the territory.

    Buy good names on down days, sell on up days.

    I think it’s interesting that this board is most chatty on up days…. that is Human Nature. But the time to really be planning and talking about what to buy is on down days… when we all feel like crawling into a hole and pulling a rock over our heads.

    Just talkin’ to myself again…

  189. 189
    elijahwc Says:

    BOP – while you are talking to yourself, the American Association of Individual Investors’ weekly survey is 22% bulls and 56% bears. How far back do you have to go to find JQ Public this negative???? Just Bids and Offers.

  190. 190
    ram Says:

    Is there news on HK?

  191. 191
    zman Says:

    Ram – I don’t see anything since last night’s earnings, why do you ask?

  192. 192
    ram Says:

    AH noise in price?

  193. 193
    zman Says:

    Ram – oh, I see that, mostly small volume, looks like just some out of sequence trades, sent through at the end of the day.

  194. 194
    ram Says:


  195. 195
    PackMan Says:

    HK … definitely late reports; those were not real after hours trades.

    The chart below on HK is interesting to me. HK’s Chart has clearly been in bearish trend since mid-Oct. The close today is a possible reversal, but still in a range that for now is inconclusive as to trend. Need to see if it breaks higher to change trend; or not.

    Specifically, HK tested 200 MA support on daily at about $23. It then rebounded and closed at 50 MA resistance at $24.55. Can it break abouve that, and then above $24.97 which is the 20 day MA. ??

    I do caution that my TA skills are somewhat rudimentary, and not Nicky-esqe.


  196. 196
    BirdsofpreyRcool Says:

    elijah — #189. Thanks for that update. Interesting.

    Guess I have only 2 things I want to say to that…

    1) I’m no Snorting, Frothing, Wild-Eyed Bull (especially given that Congress wants to regulate and dictate every little detail of the American Life… and tax us for that pleasure — ’nuff said). But playing the mrkt from the long side is the easier way to make money these days — as we definitely ARE in the early stages of the next credit cycle. The last one died an ugly, violent, but drawn-out death that began on Aug 7, 2007, climaxed in Oct ’08, and whimpered to a close on Dec 8, 2008… the rest was just aftermath and wallowing around in self-pity until April 22, 2009, when the next credit expansion cycle woke up and discovered itself.
    2) Hanging with the unpopular investing crowd is not unfamiliar to me. Frankly, there is less competition, being somewhat contrarian. Albeit, trying to keep my eyes wide open at the same time.

    In my experience, the professional investors who consistantly make the most money are not the same ones who follow the crowd. Frankly, the Best Ones have already left the room, once the crowd shows up. Not that I think I’m anywhere close to being in that group. Here’s a little exercise for everyone, tho… keep in mind when Buffett bought GS and then BNI… I think we will look back and wonder why we didn’t do the same… (if we didn’t do the same).

    just talkin’ to myself again.

  197. 197
    zman Says:

    Not possible BOP, I’m always here.

  198. 198
    zman Says:

    EOG – good quarter, nice to see them go ahead and release data on the 4 wells HK commented on being a JV partner in with them in the E. Texas Haynesville – big rates for the area (3 over 15 MM/d)

    KOG – Nice quarter from a numbers standpoint, not a lot new in the operations update but that was to be expected. Overall the five guys who cover this shouldn’t have any bones to pick with the numbers.

  199. 199
    zman Says:

    SD – threw up a brick, guided near term lower. Setting up 2011 with their 2010 guidance and ramping rig count. Stock should be lower in the morning as that kind of move will get you drilled these days.

    BEXP – not out yet.

    CXO – nice looking quarter so far.

  200. 200
    BirdsofpreyRcool Says:

    Yikes, z!! You jumped out and scared me! Just having a nice little chat with myself… didn’t think anyone was listening.

    My Savvy Hedge Fund Friend (who swapped into HK at 23.03 today) is the penultimate contrarian. Doesn’t always work for him… but works well enough to have sacked away many 10s of $1MMs. He is totally obsessed with energy now… has been since 1997, when he was a “too early to the party” investor in Russian hydrocarbons. He now has energy investments (literally) all over the globe. But, they tend to be pretty contrarian stuff (like Ukraine’s home-grown version of Gazprom… which he was telling me about today, while doing the RRI –> HK swap).

  201. 201
    BirdsofpreyRcool Says:

    Thanks for the summaries. You’re right… you never sleep.

  202. 202
    BirdsofpreyRcool Says:

    z — re SD, is there a price you would buy it now, and stick it in the LT portfolio? Or, think you will back-pocket SD for a coupla quarters. Just wondering. thx.

  203. 203
    zman Says:

    re 202 – Bought some while you were away, a little higher than here. Will hold that for now.

  204. 204
    BirdsofpreyRcool Says:

    z — reading thru SD… here’s the thing… their 2010 budget is higher than anticipated cash flow… which means either revolver borrowing (which is currently zero) and/or more equity issuance, and/or asset sales. And even tho they expect to outspend cash flow, they are only predicting a 15% increase in 2010 production. (If I recall correctly, HK is also going to outspend cash flow, but expects to get a 43% bump in 2010 production, on top of higher 2009 production.) Hmmmm… not very exciting stuff.

    Looking at the 3Q09 actual financials, I don’t see this quarter as a big miss… just that a lot of money will be spent going forward that doesn’t result in the same amount of production increases that the Shale Kids are expecting.

  205. 205
    zman Says:

    BOP – yep, exactly. Don’t see more stock issuance for them, just charging up the revolver a bit. 2011 will be their debottleneck year. Money gets bored with this kind of stuff pretty easily. I’ll wait on the Crusader acquisition comments before considering selling and avoiding for a time. At least they are well hedged (about 2/3s at $7.70 in ’10)

  206. 206
    RMD Says:

    will search for Keybanc stuff. Remind me should I forget.

  207. 207
    zman Says:

    Ram – I spoke too soon the other day.


  208. 208
    zman Says:

    more on Ida:


  209. 209
    bill Says:


    sd production will crank up when the oxy plant comes on line so the production surge happens in 2011

    they slashed drilling in 2009 to preserve cash

  210. 210
    bill Says:

    bexp with a break even qtr

  211. 211
    zman Says:

    Post will be out shortly after Payrolls hits.

  212. 212
    bill Says:


    Id buy on weakness and put it away

    In fact i did buy at prices north of 13, lol

    So im early as always

    I can’t fault anyone waiting 2 qtrs either as ng isnt doing anything and sd is a leveraged play on ng prices

    well hedged in 2010 with no hedges beyond that adds to the excitement factor

  213. 213
    bill Says:

    10.2 % unemployment, terrible

    Amazing the markets is at 10,000 and anti-business progressives in charge does not auger well for the future

    Oh well, Be Happy

  214. 214
    BirdsofpreyRcool Says:

    think the double-digit unemployment number was inevitable for this downturn. But Jobs Numbers trend on non-farms still good tho. Especially with the revision to last month’s. The 10-handle on unemployment is the kind of headline risk I worried about for today… but, bonds not reacting much to it.

  215. 215
    euros to pound conversion Says:

    euros to pound conversion…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Thursday – Gas Preview and Oil Inventory Review + Lots More Earnings[…]…

  216. 216
    conversion for dollars to pounds Says:

    conversion for dollars to pounds…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Thursday – Gas Preview and Oil Inventory Review + Lots More Earnings[…]…

  217. 217
    xét nghiệm máu ở đâu Says:

    xét nghiệm máu ở đâu

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