10
Nov

Tuesday Morning

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Market Sentiment Watch: Again, cautiously optimistic. No economic data release today or tomorrow. I think yesterday's move on a weak dollar and little in the way of earnings surprised bulls and bears alike. The potential head and shoulders pattern that was forming for the S&P 500 was snapped as the index ran through 1,075. And at 2093, the S&P is only a solid morning opening away from the 1,100 mark which many a bear has touted as the high for the year, a high we have already seen. As to the 30 Industrials, those hit a new high, and closed at it, over 10,200 yesterday. If you are a portfolio manager with cash on the sidelines and therefore lagging performance for 2009, the shadows are closing in. As far as my performance goes, volatility continues to hold sway and I am quite long, probably too long, with so little time (9 days) left in the life of the November contracts. I plan on taking losses and some profits later this week.

 

From The MMS on Tropical Storm Ida:

  • About 384,642 barrels of oil and 1.925 billion cubic feet of daily gas production have been idled.
  • The Gulf produces 1.3 million barrels of oil and an estimated 7 billion cubic feet of gas a day.
  • I would expect production to rapidly come back on line today so probably minimal impact on natural gas (you probably won't see it at all in the weekly number next week) and a hiccup in oil imports and production numbers in next week's oil inventory report.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $25,900
    • 46% Cash
    • The Current Holdings Tab is updated.

  • Yesterday's Trades:

    • None.


Commodity Watch

Crude oil rallied $2.00 to close at $79.43 yesterday on the back of a new 15 month low in the dollar.  This morning crude is trading up 30 cents plus due to EIA and Goldman Sachs. The dollar is trying to catch a small bounce but that looks fairly tentative.

  • Early Read On Oil Inventories:
    • Crude: Up 1 mm barrels
    • Gasoline: DOWN 0.6 mm barrels
    • Distillates: DOWN 0.5 mm barrels
  • IEA Watch: The Paris based energy forecasting group says global energy demand is about to turn to the upside. They released their long term energy demand forecast today which shows demand up by 40% between now and 2030. The Group said Asian demand will grow 76% over the same period. Pretty useless in my world. They reiterated that high prices are a threat to the economy as is lowered investment in the oil patch (down $90 billion global in 2009 vs 2008) and I say make up your mind as you guys constantly ask OPEC to produce more, then whine about high prices, and then say prices are not high enough to inspire investment.
  • IEA Watch 2: The U.K.'s Guardian paper is reporting that a source inside the IEA says that many there believe peak oil is much closer than the group openly admits, saying that many believe 90 to 95 MM bopd is an impossible target now but that fear of widespread panic keeps the IEA from reporting it. 
  • Goldman Sachs Oil Comments: (these are from a report out today)

"We continue to expect generally positive OECD economic indicators will boost oil demand in the developed economies, reinforcing strong emerging market demand" ... "Robust economic activity [in China] has helped propel oil demand back above pre-recession levels," 

The bank predicted the glut of global oil inventories would dwindle into a deficit over the coming months due to strong Chinese demand for industrial fuels and an anticipated recovery oil consumption from developed economies. ~ from Dow Jones.

ZComment: They left their $85 year end and $95 by year end 2010 expected oil prices alone but I'd bet 2010 will be upped relatively soon.


Natural gas moved up $0.07 late in the session to close at $4.67 yesterday. Gas prices remain subdued in the wake of a less than bullish looking report at the end of October and due to mild Fall weather which threatens to extend the shoulder season. Traditionally we see our first withdrawal of the season sometime between the first week of November (so this week's report) and the third week of November.  This morning gas is trading off nearly a dime, following through on weakness that began a few days ago and which was temporarily sidelined by the threat of Ida.

  • Imports Watch: 7.2 Bcfgpd, down 0.2 Bcfgpd from last week and 1.2 Bcfgpd from last year.

    • Canada: Continues to weaken, now at 6.1 Bcfgpd, just off the lows for the year.
    • LNG: drifted slightly lower to 1.1 Bcfgpd, still up from last year but down sharply from prior years.

Crack Spread Update


 

Key Takeaways:

  1. Cracks remain weak.
  2. The only way to combat weak margins proactively is to cut throughput. Cutting throughput will likely lead to lower earnings. For an extended period of time.
  3. The other way to combat soft margins is to wait for demand to pick up. So far gasoline demand is holding up ok and distillate demand shows some seasonal rebound but remains at very low levels. Meanwhile, oil prices remain strong due to the dollar.
  4. In other words, continued world of hurt for most refiners. Places where we saw strength in cracks like the West Coast have been quick to retreat in the 4Q.
  5. I continue to avoid the group but will duck in on the TSO analyst call today.


Stuff We Care About Today

ROSE Wrap - Highlights From Yesterday's Earnings Call

  • Get ready for double digit growth guidance for 2010
  • The first 2 wells in the Eagle Ford are doing well, 1st was dry gas, 2nd had a high liquids cuts, and a 3rd will spud shortly in the dry gas area.
  • In the Bakken, they have hydrocarbons in the first well in Montana which is at TD awaiting completion. A second well has been spud.
  • They have high working interests in both the Eagle Ford shale and Bakken areas
  • The company continues to add acreage to its Eagle Ford Shale and Bakken Plays
  • Maintenance capex - just enough to hold produciton flat - is probably about $150 mm, down from prior estimates of $170 mm as costs have fallen and they have found some procedures in the past, like fracing recompletions in the Sacramento Basin, to be unnessary. 
  • We should get both guidance for 2010 and results from the first Bakken well in mid December
  • I continue to hold the common here and may add December calls in the first week of next month.

Shelf Player Multiple - Part I- Getting ready to add a name in the long term (stock) portfolio for the next up cycle.


Key Thoughts:

  • The general problem with most Gulf of Mexico shelf player is high decline rates, coupled with high operating costs, and exploration risk. Throw in low gas prices and most investors prefer the relative safety of the 100% success rates and more easily tabulated production and reserve growth of the onshore, non-conventional plays (used to be CBM, not its gas or oil shale). 
  • As prices rise and the financial market discombobulations become a more distant memory, and as the SEC revises its reserve rules on pricing at year end to pricing over the year, I like the idea of moving a little further out on the risk limb.
  • I have not made up my mind which of these to go after although MCF is at the head of the pack. I am consider a basket of common and calls on ATPG and SGY (and I've been critical of both names in the past.
  • Tomorrow I'll add comparisons of production profiles, $/ Mcfe of reserves, hedges, balance sheets and cash costs to this quick look at the group.

AXAS - 3Q Conf Call at 11 am EST. This one is not about the quarterly numbers but about the reorganized company going forward

Odds & Ends

Analyst Watch:

  • CRZO - Natixis ups target from $23 to $30.
  • (NAT ) - upped from Underweight to Neutral at JPM

Interesting Reading Watch:

113 Responses to “Tuesday Morning”

  1. 1
    Wyoming Says:

    Z,
    Is QBC back to a stock who’s value is equivalent to a theta-less option?

  2. 2
    zman Says:

    Wyo – lol, yeah, um maybe, balance sheet a problem there. Went from expensive doughnut hole of acreage to less worthy doughnut whole of acreage in less than a year. I think they missed their window on punting early.

  3. 3
    Wyoming Says:

    Better odds than a refiner.

  4. 4
    zman Says:

    DWNS – out with numbers, will listen to call at 10 EST, can’t recall last time I made money in a seismic name, but good to catch up with the space.

  5. 5
    zman Says:

    Wyoming – So my wife, who I put in FTO awhile back (2008), keeps telling me about her GOOG position.

  6. 6
    zman Says:

    BOP – can you take a look at the SFY note offering? The stock is sort of an interesting way to play the E.F.S.

  7. 7
    zman Says:

    NG looking to open down nearly 5%

  8. 8
    BirdsofpreyRcool Says:

    z — one other column to add to your potential Shelf Kids consideration…. if you’re bullish that we are in the early stages of the next expansion cycle (as i am). Add a Total Debt per share column. Unless it bankrupts you, adding the right amt of debt “turbo-charges” equity returns. Unless it bankrupts you first! But, very useful. Could even barbell… with a leveraged kid and a debt-free one. Guess that also requires one more column… % of current production hedged.

    Just a few thoughts, anyway.

    The more leveraged way to play any rebound in Shelf production (IMHO) is HERO. But, I’m beginning to sound like a broken record here… and HERO is not expected to earn all that much until 2011. So, have to look through a pretty wide trough.

    I’ll take a look at SFY. But, not a fan of mngt there. Nice guys… just can’t depend on them to do the right thing. Well, maybe that has changed over the last few years…

  9. 9
    zman Says:

    BOP – too right.

    Re SFY management – Terry is a nice guy, Bruce Vincents is a good guy too and maybe a little harder edged, they had a big hit early this decade at Lake Washington (salt dome, stacked sands underneath the overhang), I think they are competent as long as they stay in the U.S. and away from Kiwis (the Taranaki Basin was a huge boondoggle but I hear a nice place to visit).

  10. 10
    BirdsofpreyRcool Says:

    TechTrader is 55/45 LONG today… but not a lot of conviction behind the call.

    HeadTrader saying it will probably be a choppy trading day, ahead of Vet’s Day tomorrow.

    Bond mrkt already trading like it’s a Half-Day today.

  11. 11
    zman Says:

    Reading stories about toy shortages, not demand but lack of inventories, wonder if we see a last 7 week restock rush to meet some obvious pre Christmas demand. Could be good for diesel. I’d guess the stuff would already have to be on ships coming over from China. Wondering if this helps explain recent big rally in dry bulk rates.

  12. 12
    BirdsofpreyRcool Says:

    z — SFY, agreed on all points. It’s a barbelled company (in the same way an “Idiot-Savant” is barbelled). But I could never tell if Lake Washington was planned… and New Zealand was a fluke. Or vice-versa.

    The New Zealand program was flawed to begin with. There was never enough people in NZ to warrant a pipeline… and SFY didn’t have enough money or expertise to build an LNG Terminal. I never “got” that prospect. Personally think they just liked to visit.

  13. 13
    zman Says:

    Oil up 50 cents on the open. Whistleblower at IEA ruling the day.

  14. 14
    zman Says:

    SFY – I think both were planned, I think they simply saw more oil on NZ on seismic than they found. Lots of delays, cost over runs, found some gas which would have gone to a local (I think ammonia) plant if memory serves. Anyway, that’s gone, punted. Lake Washington was home grown from what I remember…now it has been somewhat neglected during the weak price environment. Not sure how much potential is left and the stock has run… I was just asking because some here like bonds.

  15. 15
    zman Says:

    BOP – agreed re markets acting like the this is a holiday, whole lot of directionless trading going on on nothing in terms of volume.

    Energy acts like it kind of wants to add to moves from yesterday in a couple of names but then you look at the volume and note that its one or two guys messing around with 10 shares between them. Tomorrow promises to be even more boring.

    The S&P and DJIA are moving up above yesterday’s highs but I don’t get volume on that.

  16. 16
    zman Says:

    Analyst Watch:

    PXD – Credit Suisse ups target from $39 to $44 which is where it’s at. Way to be a value add dude.

  17. 17
    baylor3217 Says:

    Thoughts on SWN for Dec calls?

  18. 18
    zman Says:

    Baylor – I’ll let ya know when I do it.

  19. 19
    zman Says:

    On DWSN call

  20. 20
    zman Says:

    Fed’s Yellen sees signs of jobless recovery

    DWSN – Conference Call:

    Tough times in seismic industry.

    Maintaining strong balance sheet.

    Have aligned capacity with market realities. 9 crews working, down from 16 last year. Kept best peeps.

    Company believes it will emerge stronger than ever from the current cycle due to capital discipline.

    Thinks it will take advantage of opportunities to purchase equipment on the cheap out of this cycle.

    Do not see expanding internationally as there are plenty of oil and natural gas shales in the U.S.

    No guidance will be provided today.

    Estimates are weird here. Going to Q&A now.

  21. 21
    isleworth Says:

    DWSN comments are helping TGE, another seismic player which just announced a Canadian acquisition

  22. 22
    zman Says:

    DWSN Q&A:

    Backlog – gets them into calendar 2010. They have “some” visibility into 2010, maybe 9 or 10 crews worth through the first quarter.

    Short term utilization remains difficult to predict.

    October was bad from a weather standpoint on utilization. November has been better. Says it changes day to day.

    Says he’s cautiously optimistic over next few quarters.

    Says they are seeing “some uptick in bid activity”. Won’t give much color on that comment, says they may not be out of the woods, as an industry yet. Says there seems to be some optimism from the E&Ps due to commodity prices which is feeding a “steady uptick in seismic bidding activity”. Says DWSN is more optimistic than in recent quarters.

  23. 23
    zman Says:

    Isle – right, and SLB too with their Western Atlas division, which is why I’m really listening to this call.

  24. 24
    Nicky Says:

    Morning all. Still appear to be in a third wave to the upside. Should see a pullback to 1084 and then further upside to 1108 – 1112 spx.

  25. 25
    isleworth Says:

    For some comic relief on whipping boys Goldman Sachs – watch this video 🙂

    http://www.huffingtonpost.com/2009/11/08/seth-meyers-amy-poehler-g_n_349895.html

  26. 26
    Nicky Says:

    Kind of surprising to see CNBC wheeling out traders this morning who said they were selling into this rally. One even said that he expected the Fed to be bankrupt within 18 months – and this is a trader who is on most days! Can’t remember his name.

  27. 27
    Nicky Says:

    Rosenberg Sees 13 Percent Jobless Rate

    Monday, November 9, 2009 11:06 AM

    By: Dan Weil Article Font Size

    Economist David Rosenberg said the U.S. jobless rate could hit a post-World War II peak of 13 percent, thanks to a sluggish economic rebound.

    Already, unemployment reached a 26-year high of 10.2 percent in October

    “This is going to be the mother of all jobless recoveries,” Rosenberg, chief economist at Gluskin Sheff & Associates, told Bloomberg.

    “At the beginning of the year, who was calling for unemployment to go up to 10 percent?”

    The effect of this recession, the worst since the Great Depression, won’t end quickly, Rosenberg said. The economy is “in a post-bubble credit collapse.”

  28. 28
    zman Says:

    BEXP back through $11 … back to paying attention to what oil is doing.

  29. 29
    Nicky Says:

    Prechter calling for 33% –
    * * * * *
    Excerpted from The Elliott Wave Theorist, January 22, 2009

    “As we have long argued, because the current bear market is of one larger degree than that of 1929-1932, the depression it creates will be deeper, which in turn means that the unemployment rate will exceed that of 1933. The peak rate in 1933 was 25 percent. Therefore, unemployment in the U.S. should rise to about 33 percent at the trough of this depression. Fitting this expectation, U.S. job losses in the fourth quarter were greater than at any time since 1945, when World War II ended and defense factories shut down to re-tool. Even after this plunge, however, the ‘official’ unemployment rate is just 7 percent. But the true unemployment rate, as it would have been measured before the era of government support payments and statistics-fudging such as omitting the number of people who give up looking for work, is currently 17 percent. (This figure is courtesy of John Williams’ Shadow Government Statistics at http://www.shadowstats.com.) So we’re halfway there.

  30. 30
    zman Says:

    DWSN call over:

    My nutshell: pricing remains difficult due to oversupply of crews and equipment vs weak demand from the E&Ps. Margins will remain under pressure in the near term. Analysts were very quick to adopt a “glass half full” with the company. Would not expect EPS to be going up for them but don’t see a lot of hacking of numbers going on either. FY10 earnings estimates are abysmally low so I guess it’s factored in now.

  31. 31
    zman Says:

    Jerome – can you take a look at BEXP?

  32. 32
    BirdsofpreyRcool Says:

    SFY new bond issue = $200mm Senior unsecured notes, SEC registered, 10NC5, B3/BB-, issued to retire the existing 7.625% sr notes due 2011 and pay down bank revolver. Banks on deal = JPM/GS/RBC/WF/BNP/Calyon/SG/BBVA/Comerica/Natixis. Expected to price this afternoon. Existing Sr unsecureds trading just under 9% YTW.

  33. 33
    isleworth Says:

    Z – how oily is BEXP?

  34. 34
    Nicky Says:

    Fed Officials: Weak Recovery Won’t Spur Jobs- AP
    Unemployment likely will remain high for the next several years because the economic recovery won’t be strong enough to spur robust hiring, Federal Reserve officials warned Tuesday.

    The Fed is trying to warn us. They must know they have an equity bubble on their hands.

  35. 35
    zman Says:

    Isle – 50/50 but getting oilier all the time.

  36. 36
    BirdsofpreyRcool Says:

    SFY … bet the new bonds come around 9.5%. But, could be a tad wider. Interesting ratings divergence between Moody’s B3 and S&Ps BB- on existing Sr unsecureds.

  37. 37
    Jerome Blank Says:

    BOP, HERO is forming a nice consolidation triangle above the daily 200 day moving avg on the traditional chart…it’s currently on a P&F buy signal below long term P&F resistance at $8-$8.50, HERO remains on a buy signal until a print of $4…I would like to consider a buy near major support at $4.50 if it trades there, do you like the fundamental value here…

  38. 38
    BirdsofpreyRcool Says:

    From Cross Asset Class Strategist #1… and I couldn’t agree more!!

    http://www.capmarkets.com/ViewFile.asp?ID1=127064&ID2=367932913&ssid=1&directory=6571&bm=0&filename=11.10.09_Detroitification_of_the_US.pdf

  39. 39
    zman Says:

    Dollar index back into red, below 75 again.

  40. 40
    zman Says:

    38 = LOL

  41. 41
    VTZ Says:

    bounced off 74.95 again looking to hold.

  42. 42
    Nicky Says:

    re 38 – they aren’t saying anything they are just standing on the fence.

  43. 43
    bloodystupidjohnson Says:

    Z — a couple questions from the EOG conf call —
    1. Papa says that some its new haynesville sweet spot has spread over into the Texas side. What your view on that?
    2. He claims some of these big Baakan wells is because of long fac and using 128 acres instead of 64. (maybe BEXP) Did you catch that and what are you thoughts on that? That statement was at the end of the conf.

  44. 44
    zman Says:

    The little pockets of strength are interesting today. Seem to be mostly chart based although I could argue for fundamental cheapness (I just don’t think it applies to today’s action, if you can call it action).

    Anyway:

    NFX adding to the little breakout of the last 2 days,

    PXD flat but same pattern.

    WLL – cheap oily Bakken name, obviously wants to go higher if the market will just not go lower. Rest of the Bakkens too but they are less cheap.

  45. 45
    Jerome Blank Says:

    #31..BEXP remains on a P&F buy signal forming a bullish ascending triangle on both the P&F and traditional charts, BEXP seems like it really wants to break above $11 having already tested it several times, the more times resistance is tested the more likely it is to break… becasue of its narrrowing range, BEXP goes on a sell signal on a print of $9, but based on the technical picture on the traditional chart, this could be a bear trap, I would not consider selling long positions until at least a break below &8.50 on a closing basis

  46. 46
    BirdsofpreyRcool Says:

    Jerome — re 37 HERO… i do. With their recent equity issuance and balance sheet restructuring, HERO has the cashflow to weather a sustained trough. 2010 will be no great shakes… that said, HERO will still be CF positive (i am guesstimating maybe $80mm after Capex?) in 2010. But the real upside comes either from a pick up in activity in 2011 and/or from any success in any of the 3 deep wells being drilled on the shelf. HERO does NOT have any rigs capable of drilling 30k ft on the shelf… but, there will be a rig-grab if the deep(s) are successful. PLUS HERO has a great barge drilling fleet, most of which are capable of drilling to 30k ft in shallow water (think LA swamps). And — as Number 1 bottom feeder — HERO has the fewest number of their rigs under contract now. So, they are positioned to weather any protracted slowness for the next few years + all sorts of call-option-type upside.

    No laughing… but I pinned a mental $10.75 price target on the shares last night. We shall see.

    Of course, $3 nat gas and $55 oil blows the investment thesis… or, at least pushes it out another year.

  47. 47
    bill Says:

    NG down 21 cents, the one year strip about 5.25.

    Ep producers making up price shortfall with pumping more volumes

    sold chk and hk today–so that means we are at a bottom

  48. 48
    Jerome Blank Says:

    Re: #46, thanks very much BOP, I will buy and hold that on any retrace near my number…

  49. 49
    zman Says:

    BSJ – He’s had results Nacogdoches county, just west of the TX/LA line in Texas and directly west of St Augustine county since 1Q. Hasn’t been much of a secret except for rate. Drilling HK there. Finding very good wells for the Texas side of the Haynesville. My thoughts are he has plenty of acreage and is not pressed by lease expirations. Many of the Texas wells drilled by others down there are smaller (lower IP, same choke, lower pressure) and are probably not economic at current gas prices. They indicated this is some of the best reservoir rock (total organic content, perm, thickness) in the play, including the NW Louisiana sweet spot where HK has drilled tens of wells now in the high teens. They have 4 wells down there now with good rates and like CHK, EOG never drills its best well first in a new play.

    2) He’s saying 1280, instead of 640 acres, that some of the rates are basically long laterals drilled across 2 sections. So you get the high IP because you are exposed to more reservoir rock than in a well half that size. That’s a big “duh” to me. Real estate has something to do with it too but if you drill on 5000 foot lateral and a 10,000 foot lateral in the same vicinity, all other things being equal, then yeah you’d expect a bigger IP out of the longer lateral. Comes down to economics. One other thing he mentioned was a slightly higher IRR on the longer well which again, all other things being equal makes sense as your are basically getting two of the shorter wells in the long well with only one vertical section.

  50. 50
    zman Says:

    Bill – thanks for your efforts there. It may have a little further to go but I’m not thinking it washes out here. Shoulder season demand is weak with mild weather and the hangover from a near miss is always bigger than the run up (if any) that you get from a storm in the Gulf. Recall last year when we got no runs up and gas would fall hard after every storm came through the Gulf. I think gas stabilizes as soon as we see some more Winter like temps.

  51. 51
    bloodystupidjohnson Says:

    Another thing Z, it seems that some companies are converting all their oil and nat gas production into just BOE’s. They seem to be trying to hide the fact that they are finding nat gas but not that much oil. I you found this to be true?

  52. 52
    BirdsofpreyRcool Says:

    Jerome — the reason HERO crapped out the other day (when i was outta the office) was that Pemex delayed their RFP for (i think it was 4) jack-ups. This was taken as a further sign that nobody wanted GoM shelf assets and that nothing positive would ever happen again and that no one would ever make money owing jack-up rigs. That was a good day to buy.

    However, with a strong recovery in asset utilization and rates still projected to be about a year off, HERO will continue to be subjected to the volatily of Nervous Longs. So, have to buy right and buckle in for (perhaps) a long ride. But, i just love to find cheap call options with a number of ways they can get triggered. I think HERO stock represents that opportunity. It’s just that it could be a long-ish wait with several bumps along the way.

  53. 53
    zman Says:

    BSJ – No. They’ve always done this. Just about every real company breaks out the BOEs or Mcfe’s from the headline number.

  54. 54
    zman Says:

    BOP – why them over an RDC or ESV?

  55. 55
    Jerome Blank Says:

    Re:#52, Thanks BOP, I’m with you…I really like stocks like HERO, and thank you for all of the great nsight…please continue to mention stocks such as this when you see them…

  56. 56
    bloodystupidjohnson Says:

    I give you an example where I found this — EAC. Last year or the the year before young Brumley said that from now on they will just use BOE for all reporting purposes. Thus all nat gas would be converted into a BOE figure. So the headline and talking head numbers of X increase in BOE (which talking heads will say was barrels of oil) would look much better to the public — because finding oil more valuable than finding nat gas.

    This was sort of like in the old days where the headline number would show an increase in earnings, but don’t look behind the curtain at all those writeoffs which was not included in the headline number.

  57. 57
    BirdsofpreyRcool Says:

    #54 = size of company, concentration of assets and geography, amount of leverage (debt/assets), and biggest underperformer in 2009.

    HERO used to be the target of short sellers in the long HAWK/short HERO pairs trade. Most (all?) of those shorts have covered. That game is over. The worst that could happen is that we continue to bump along the bottom for another year and a half… but, HERO has the balance sheet to weather that now.

    Basically, it appeals to the contrarian, leveraged-balance sheet (but adequate liquidity) investor in me. And it’s a pure play on the much-hated GoM shelf and transition zone. Not sure it can get much worse there — so, it has to get better (at some point). Also, I don’t have to follow international drilling RFS and trends. Just watch stuff unfold in my own backyard, so to speak.

  58. 58
    zman Says:

    BSJ – I just don’t see it as a deception, certainly not one that’s going to fool any analysts or any investors. Been in the business a long time, and don’t think its anything more than ease of use. If you are oilier than not, you use BOE but somewhere in the report you break out the oil and the gas. If you are gassy, you use Mcfe.

  59. 59
    zman Says:

    Re 57. Thanks. Lots of rigs left the Shelf for greener waters around the globe.

  60. 60
    bloodystupidjohnson Says:

    Well Z, you are much more trusting than I am, and with a much higher opinion of analysts or investors.

  61. 61
    zman Says:

    BSJ – one thing I am seeing that is relatively new is the comparison of a well on Mcfe’s at the normal 6 to 1 ration (6 Mcf = 1 barrel of oil) and then again at the (15 to 1 ratio) which more closely approximates their revenues at the present time from such a well. Almost all of the Eagle Ford guys are showing their IPs both ways if they have a large amount of associated liquids with the gas. So a 13 MMcfepd well if it were all gas or oil would be 13 MMcfepd for reporting purposes or it could be something like 19 MMcfepd if you want to compare a well with a higher condensate cut relative to the value of a dry gas well.

  62. 62
    zman Says:

    BSJ – I don’t see it as a matter of trust. They still disclose what is oil and what is gas and what is NGL’s, it’s all there, same as always. Some people report BCFE, some report MBOE and some report those as daily figures. But in the body of the reports almost everyone always reports what is gas by volumes and what is oil by volume. I don’t see any need for trust when its all there.

  63. 63
    BirdsofpreyRcool Says:

    #59 — exactly. That’s part of the thesis. No one thinks anything is gonna happen on the shelf… so, redeploying assets overseas (Africa, So America). Those rigs ain’t coming back. NewBuilds threaten with new supply… but, a lot of those NewBuild programs have been purposefully delayed, while day rates have remained depressed. Also, HERO’s rigs won’t really compete with the newbuilds, i’m guessing. When you’re the bottom-feeder, you’re the lowest asset on the totem pole. But, in an up-cycle, crappy, low-depreciation assets are very profitible.

    It’s far, far from a SURE THING. But, once HERO got it’s balance sheet in order, they reduced the probability of the Ch11 and extended the life of the embedded call option. Like EXXI. To summarize, the probability of the “wrong-side” of the skewed bell-curve of potential outcomes for HERO stock prices has been reduced.

  64. 64
    bloodystupidjohnson Says:

    If the headline number, is that we have increase our BOE by 19%, but 18% of that is nat gas, some people might assume they where talking about oil and not nat gas.

    Remember these are the same companies that are still claiming that stock option expenses is not a real expense.

    This is my last comment because I don’t want to tie up your sight on this.

  65. 65
    bloodystupidjohnson Says:

    Cheap shot department: Arthur Berman is a skeptic on shale gas. He use to write a column for World Oil. However the good folks over at HK seems to not like his column and Berman claims that they got him fired from that gig

    http://petroleumtruthreport.blogspot.com

  66. 66
    zman Says:

    Red, low volume day, doing some reading.

  67. 67
    zman Says:

    re 65 – well I guess he should get his own site.

  68. 68
    AAA Says:

    Z, I know ECA was discussed here a few days ago, but I can’t seem to find it. A relative of mine called me wondering what to do with their small position. Any reason to hang on to it or just dump it in favor of one of your go-to names?

  69. 69
    zman Says:

    AAA – I don’t know yet and don’t know if I will as I don’t own it. They report on Thursday. The company is splitting up and VTZ is more in tune with it than I am.

  70. 70
    zman Says:

    BP – restaffing Gulf structures, sees no major damage. Not surprising, saw one comment of light damage on the Shelf from CVX.

  71. 71
    bill Says:

    doing a little research on mcf i found this

    http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5928659

    Peak, the ceo put a poison pill in shortly after this but he has been buying back shares on a regualr basis

  72. 72
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    · SP500 off ~2 points to 1090 as of 12:10 in light volume trading. Mon was a light volume melt-up rally driven by financials and materials. Volumes remain pretty light today and the room again is on the quiet side. There is real money participation on the long side and stocks remain tough to buy (people aren’t chasing though). Some pullback/profit taking in the groups that were up the most Mon (REITs, banks, metals esp), but no conviction behind the selling and shorts scared to put on exposure in size. 1100 watched again on the upside (we hit 1096 so far today before pulling back). As usual, equity investors have eyes glued to currency screens. Bottom Line – some people pointing to negatives for the “weakness” today (like the Dodd bill, some COF comments at a conf this morning, etc) but trend remains to the upside. Technicals and the dollar matter more at the moment that any news item.

    · Equity sectors – seeing “safety” outperform today (although not by much); health care, staples, utilities, and telecom services are all in the green as of noon (within the staples, food and beverage stocks are the strongest). On the downside, financials are underperforming, falling ~0.9% (banks and REITs weigh). Industrials and materials are also lagging. Tech pacing about inline w/the broader sp.

    · Commodities – Commodities are mostly flat today as oil stays around $79 and gold remains above $1,100. Copper is off slightly on the heels of a report that China may have to re-export some copper due to oversupply.

    · FX: USD (DXY) is flattish around 75 today. The dollar is flattish against the Euro, pound and Yen . The Euro is slightly weaker against the Yen today.

    · Corp Credit: Credit is trading flat along with the market. IG spreads are mostly unchanged while HY is flat to down slightly.

    · Treasuries – 2yr yields continue to creep lower, falling ~2bp today (heading to 0.8% lows of Mar). We are again seeing a slight flattening of the 2-10 year spread today after a large amount of steepening last week.

    · Washington headlines – slew of dovish commentary from various officials on the tape today, but the key will be Bernanke next week. Sen Dodd released the draft of his financial regulatory overhaul (everything pretty much as expected and this is still a long way from becoming law). On the health care front, Sen. Reid is talking about bringing a bill to the Senate floor next week.

  73. 73
    zman Says:

    BOP – wondering if they bang the markets higher into the close. Nothing in terms of data coming out tomorrow either. Thursday we get claims, trade balance, and Walmart’s EPS and holiday outlook.

  74. 74
    bill Says:

    I need to catch up on the story–

    sellers was a hedge fund that got hit with redemptions. Looks like Peak outlasted the evil hedge fund manager

    http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_C/threadview?m=tm&bn=11287&tid=3363&mid=3363&tof=16&frt=2

  75. 75
    zman Says:

    Bill – on the metrics alone, MCF is head and shoulders above the other Gulf of Mexico Shelf centric players I have found, not even a close race.

  76. 76
    BirdsofpreyRcool Says:

    #73 — I’ll wake HT up from his nap and ask him. Give me a sec…

  77. 77
    zman Says:

    BOP – TT too please. Thanks.

  78. 78
    BirdsofpreyRcool Says:

    Some midday comments from the ETF trading desk of a large, NY-based bank …

    ETFs: Tech (SMH, XLK), utilities (XLU), retailers (RTH, XRT), and healthcare (XLV, PPH) are today’s top performers. We continue to see covering in the tech space as well as retail ahead of more earnings this week, but we are consistently seeing sellers in utilities (XLU) following it’s over 5% move since the beginning of the month. The early market rally this morning was once again on light volume which could explain the quick and efficient rollover off its highs. During and since that slide began we’ve had shorts come back (after yesterday’s covering) in Energy (XOP, XLE, OIH), gold/silver (GLD, SLV), and financials (XLF, KRE, KBE). Most (everyone I’ve spoke to at least) have little faith in this rally on such light volume, and I tend to believe the same given how little it takes to roll this mkt over…but you know that means. Beware of those retail numbers, as well as initial jobless claims later this week as a catalyst to move this market in a more defined direction.

  79. 79
    zman Says:

    BOP or anyone – a little interpretation for the gang please:

    US $25 billion 10 year at 3.47%, bid to cover 2.81. Any thoughts on the bid to cover?

  80. 80
    BirdsofpreyRcool Says:

    HT has no opinion on the direction of the mrkt for the rest of today. Unusual. He usually has some bias. But there you have it.

    Good dog-walking afternoon, i guess.

  81. 81
    zman Says:

    BOP – I’m not surprised, market is full of low volume noise, a directionless who cares kind of day, probably worse tomorrow.

  82. 82
    BirdsofpreyRcool Says:

    U.S. Treasury 10-Year Notes Yield 3.47% at Auction 2009-11-10 18:07:04.944 GMT

    By Kristy Scheuble
    Nov. 10 (Bloomberg) — The U.S. Treasury Department sold
    $25 billion of 10-year notes at a yield of 3.47 percent, as demand fell relative to the last auction of securities with the same maturity.
    The auction yield was lower than the 3.475 percent yield traders anticipated in a Bloomberg News survey before the auction.
    The bid/cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, was lower at 2.81, indicating weaker demand. At the Treasury’s last sale of the notes the ratio was 3.01.
    Indirect bidders, a group that includes foreign central banks, bought 47.3 percent of the amount sold, compared with
    47.4 percent in the prior auction. Primary dealers bought 48.2 percent, compared with 47.5 percent in the previous sale. Direct bidders purchased 4.5 percent.
    At the previous auction, the notes yielded 3.21 percent. In when-issued trading before today’s sale, the notes drew yields ranging from 3.47 percent to 3.48 percent. In trading after today’s auction, the benchmark 10-year note yielded 3.46 percent.
    The Treasury sells all its bills, notes and bonds on a single-price basis. Notes are awarded at the highest yield needed to sell the securities.

    Auction Details

    At today’s auction, 82.49 percent of the bids that were filled came in at the high yield of 3.47 percent. The low yield submitted was 3.25 percent, the median yield was 3.42 percent, and the coupon rate was 3.375 percent. The price was 99.203098.
    Tenders totaled $70,134,616,800 and the Treasury accepted $25,000,110,600 of the bids. Competitive bids awarded totaled $24,794,093,800. Non-competitive bids awarded — including those sold directly to individual investors — totaled $106,016,800.
    For its own accounts, the Federal Reserve bid and was awarded $3,108,283,300.
    The notes will be dated Nov. 15, settle Nov. 16 and mature Nov. 15, 2019. The CUSIP number on the notes will be 912828LY4.
    The minimum amount for Strips was $100.
    Strips is an abbreviation for Separate Trading of Registered Interest and Principal of Securities. Coupons are separated from a note or bond and become a security. The remaining face value bond becomes another security that is known as a zero-coupon note or bond.

  83. 83
    BirdsofpreyRcool Says:

    SFY new Sr Notes — price talk 9.125 to 9.25%. So at least 25 bps tighter than I guesstimated this morning. This morning’s on-line roadshow must have gone well.

  84. 84
    choices Says:

    Z, re: drillers, a few days ago (or maybe longer), you mentioned ATW favorably-what are your current views on ATW compared to some of the others discussed recently. On the chart, it seems that it is running into resistance so maybe waiting for a pullback would be prudent.

    Thanks.

  85. 85
    choices Says:

    A battle seems to going on with gold at the 1100 level.

    DX flat.

  86. 86
    zman Says:

    Choices, they are a late announcer, I think the 23rd, planning to add some prior to that. I sat out the last call. Essentially they are a small operator, 9 rigs with 2 more on the way. Like everyone else they have been jockeying to keep their lower price, less capable rigs busy and have been doing a pretty good job with that. They have a couple of high end rigs being delivered over the next 2 years which substantially change their earnings profile (hockey stick) as those will command big rates and better margins upping their overall fleet margin.

    EPS estimates look like this:
    2008 $3.34
    2009 $3.79
    2010 $4.03
    2011 $5.13

    It’s hard for the big guys to get that kind of leverage on earnings without a general recovery in rates. For the little guy, adding the new rigs accomplishes it. If you are doing homework on the name know they are men of few words on the press releases, almost no color there. Seeking alpha transcripts if they are still available are pretty good source for some feel. Anyway, they have been fairly conservative with the balance sheet and at some point will get a couple of their out rigs back on a job which could add further upside to the 2010 numbers.

  87. 87
    zman Says:

    Good for a chuckle on a slow day, sent by a doctor friend of mine.

    http://www.time.com/time/magazine/article/0,9171,1935092,00.html?xid=rss-topstories-polar

  88. 88
    BirdsofpreyRcool Says:

    #87 — would explain why my old friends in California seem to be awwwwwwwwwwwwwwwwwwwwwwfully slow at getting around to answer emails. Didn’t know it was that easy there now. Wow. It didn’t make me laugh, tho.

  89. 89
    BirdsofpreyRcool Says:

    Slow Day Rumor Mill — Oil Scouts (think “spy-vs-spy”) are saying that there is a ground rumble building around Jim Bob. That at least one of the 3 deep wells currently under the drill bit will be a success. That would lite a rocket ship under anyone with significant shelf acreage holdings.

    Which, i guess is the point of your posting this morning, z.

  90. 90
    zman Says:

    BOP – I’m working on that point right now.

    Did TT have any thoughts on his Long call?

  91. 91
    BirdsofpreyRcool Says:

    TT hit the beach hours ago. We are flying blind, sir!

  92. 92
    zman Says:

    BOP – that’s ok, so’s the market. Same pockets of strength stocks from earlier inching up now.

  93. 93
    zman Says:

    WLL – insiders cash some small tickets into this recent rally. Can’t blame them and as of yet they are small amounts.

  94. 94
    zman Says:

    Strong late day recovery in oil…crazy market.

  95. 95
    VTZ Says:

    WLL is looking like one of the equities that wants to participate in the oil rally the most.

  96. 96
    DrLink Says:

    don’t remember if this was posted yesterday, but reading for a slow day…..

    http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

  97. 97
    zman Says:

    Dr, nope, that was referenced in the post though. I doubt the part about the U.S. having any sway over the group in terms of not posting it if they felt it was the way to go.

    Oily names waking up.

  98. 98
    zman Says:

    BOP – did you ask for a column on hedges and a column on debt/share?

  99. 99
    zman Says:

    V – yeah, it’s cheap, easier to get people in on that basis alone than a CLR. BEXP moving and it’s expensive but has more company moving near term catalysts than either of them.

  100. 100
    jiveyjr Says:

    BEXP pooshing to new high for the day on good volume

  101. 101
    zman Says:

    Bill – see slide 10

    http://www.contango.com/investor/events/20090113/pc011309.pdf

    This was MCF’s bullish case for gas for 2010 back in January. The underlying reasons for the case have not changed.

    By October, EIA 914 data had driven them to take a much more bearish stance and omit that slide.

  102. 102
    zman Says:

    Would someone be good enough to post API numbers after the close? Thx. We don’t get the EIA numbers until Thursday this week.

  103. 103
    zman Says:

    Jerome – thanks for 45.

  104. 104
    zman Says:

    A close over $11 would be an ’09 closing high for BEXP.

  105. 105
    kyleandy Says:

    z – have u noticed every time u mention BEXP it slides back. maybe u shud whisper to us!!!

  106. 106
    zman Says:

    Kyle – you call a nickel sliding back? Wow, tough crowd.

  107. 107
    zman Says:

    Beerthirty

  108. 108
    skimo Says:

    Anybody have any insight into Bolt?

  109. 109
    BirdsofpreyRcool Says:

    BOLT = good cash flow, pile of cash, no debt, micro-mini, with no analyst coverage. Marine data acquisition hardware manufacturer… pretty cyclical, but see bump in revenues from 2004 thru 2007, then off a cliff. Managed to keep EPS positive tho… wonder why someone doesn’t buy or mngmt LBO this little company. Classic candidate, it looks like…

    skimo, any thoughts as to why no one cares?

  110. 110
    zman Says:

    GEOI out with an ops update

  111. 111
    BirdsofpreyRcool Says:

    z — you see the refinery comments by TSO? Tells me there is one less energy sector I have to follow for a coupla yrs… dismal stuff.

  112. 112
    BirdsofpreyRcool Says:

    Summary of today’s excitement, by a CMT (and Chief Market Strategist) of a small, institutional boutique —

    Flat as a Pancake

    The only thing we could think of that is flatter than a pancake is today’s market. In what was a slow, uneventful session, the market did not provide much excitement. Not one major sector closed up or down more than half a percent for the session. Even more remarkable is that 5 of the 10 sectors did not close more than 6 basis points from yesterday’s close. The noteworthy divergences in the equity market that were readily apparent was the Russell’s underperformance by 89 basis points and the modest outperformance by the Nasdaq 100 by 35 basis points. The Russell weakness contributed to weak breadth within the Russell 3000 in which decliners led advancers at a rate of just over 2 to 1. The Dollar index was also flat for the trading session, but equities continue to take their cue from this currency basket. Despite an early rally and quick sell off following the auction, $24 billion in 10 Years, Treasuries also wound up posting a flattish session. All in all, this was not a bad consolidation day considering the action of the past few sessions.

  113. 113
    BirdsofpreyRcool Says:

    Without the Bond Market to kick around tomorrow, US equities may take their cue from Asian trading… if so, tomorrow could be fun.

    Asian Stocks Advance as Japan Machinery Orders Beat Estimates
    2009-11-11 01:00:30.977 GMT

    By Patrick Rial and Kotaro Tsunetomi
    Nov. 11 (Bloomberg) — Asian stocks rose, driving the MSCI Asia Pacific Index higher for a fourth day, after Japan’s machinery orders increased more than economists expected and shipping rates climbed.
    Mori Seiki Co., a maker of precision lathes, advanced 1.9 percent as orders for Japanese machinery climbed 10.5 percent in September. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 3.2 percent in Seoul as the Baltic Dry Index posted its steepest jump in a month. Newcrest Mining Ltd., Australia’s largest gold producer, gained 0.7 percent as bullion advanced.
    Daikin Industries Ltd., the world’s No. 2 air conditioner maker, jumped 3.2 percent after lifting its annual profit forecast.
    The MSCI Asia Pacific Index advanced 0.7 percent to 118.83 as of 9:54 a.m. in Tokyo, extending its four-day increase to 3.6 percent. South Korea’s Kospi climbed 0.5 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent.
    Japan’s Nikkei 225 Stock Average added 0.7 percent to 9,922.12. The 10.5 percent increase in September for machinery orders, an indicator of business investment in three to six months, beat economist predictions for a 4.1 percent increase.
    Asian investors are also awaiting data on industrial production, inflation and investments from China later this morning.
    Futures on the Standard & Poor’s 500 Index rose 0.3 percent.
    The gauge was little changed yesterday and the Dow Jones Industrial Average climbed to a 13-month high for a second day.
    Earnings from bond guarantor MBIA Inc., engineering company Fluor Corp. and the video-game publisher Electronic Arts Inc.
    disappointed investors, while American Express Co. and Bank of America Corp. rallied.

    Mori Seiki, Komatsu

    Mori Seiki gained 1.9 percent to 921 yen. Fanuc Ltd., the world’s largest maker of industrial robots, climbed 1.6 percent to 7,740 yen. Komatsu Ltd., the world’s second-biggest maker of construction equipment, advanced 0.9 percent to 1875 yen after the stock was raised to “neutral” from “underperform” at Merrill Lynch & Co.
    “The bottom is probably behind us for capital spending,”
    said Masamichi Adachi, a senior economist at JPMorgan Chase & Co.
    in Tokyo. “The retrenchment phase is over and the corporate sector as a whole should gradually pick up in a self-sustained way.”
    STX Pan Ocean jumped 3.2 percent to 11,350 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line operator by sales, rose 1.5 percent to 330 yen.
    The Baltic Dry Index, a measure of shipping costs for commodities, surged 3.9 percent yesterday, a ninth consecutive gain and the steepest rally since Oct. 8.

    Gold Futures

    Newcrest added 0.7 percent to A$35.41. Gold futures in New York increased for an eighth-straight session today in after- hours trading, rising 0.5 percent to $1,107.60 an ounce.
    The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx.
    Daikin rose 3.2 percent to 3,270 yen after raising its full-year forecast for net income, saying it sees signs of recovery in demand in China.

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