Monday Morning And All Is Sort of Green Looking

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Market Sentiment Watch: Greenish open.

  • GM reporting large cash stock pile, time line for paying the Fed's back
  • China criticized weak U.S. dollar policy ... which is leading to a weaker dollar today.
  • Retail Sales: up a weaker than expected 0.2% ex autos.
  • Empire State Index
  • In energy land it was a very slow news day until DVN announced an operational restructuring (see below). Expect news flow to pick up mid week as companies speak at the Merrill Lynch Energy Conference.

The Week Ahead:

  • Monday 11/16: Retail sales ex autos (forecast up 0.3%)
  • Tuesday 11/17: PPI (forecast up 0.5%, (up 0.1% on the core)), Industrial production (forecast 0.3%), Home Builders index (19 expected vs 18 last month)
  • Wednesday 11/18:  EIA Oil Inventory Report, CPI (forecast up 0.2%, up 0.1% on the core), Housing Starts (forecast 590K, same as last month)
  • Thursday 11/19: EIA Natural Storage Report, Jobless claims (forecast 500K), Leading indicators (forecast up 0.4%), Philly Fed (forecast 12.5 vs 11.5 last month)
  • Friday 11/20: No eco data release scheduled.

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today - DVN
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $16,900
    • 64% Cash
  • Current Holdings Tab is updated.
  • The $10KP II Spreadsheet Tab is updated.
  • Rarely have I gone into expiration week with so many underwater, near month contracts. I have sat on my hands during the last couple of weeks as the market has gone choppy but I will be taking losses, where possible this week.


Commodity  Watch:

Crude oil fell 1.4% last week to close at $76.35. The 12 month crude strip is now trading at $79.61. Demand in the U.S. for crude remained subdued according to the EIA but trading was chiefly concerned with the direction of the dollar. This morning crude is trading up 70 cents but was up over a buck on the weak buck prior to the release of retail sales.

  • OPEC Watch: The group sees demand rising by 20 mm bopd (23%) by 2030.

Natural gas fell 4.4% last week to close at $4.39 due to mild weather which is extending the injection season. The 12 month strip is now trading at $5.09. This morning gas is trading flat.

  • Weather Watch: Starting to cool back off.

    • Week Before Last: 104 HDDs which yielded a 25 Bcf injection, slightly better than average for this week of the year. We are now officially in the withdrawal season although it looks like injections may linger for a week or two long due to persistent mild weather.
    • Last Week: not available at post time
    • This Week's Forecast: not available at post time
  • Tropics Watch: Nada.

Rig Count Watch ...

... And So Far The Response To Lower Rig Counts Has Been Muted.  Over the last two weeks a number of analysts have taken their 2010 natural gas price forecasts lower due to the release of the August data which showed a small rebound in production from July. My sense is that they will view each month's data with increasing importance so September data (due out at the end of this month) will be viewed as critical. Many of these same analysts got overly bullish when the July came out pointing to accelerated declines. I think that gas will likely trend sideways until we get that better decline number (September or October) and sustained colder weather.  

Stuff We Care About Today

DVN to De-Gulf Itself, Punting International Ops as Well To ReFocus As A North American Onshore Player.

  • 7% of total proved reserves are in the Gulf of Mexico and International operations.
  • Sees asset sale proceeds of $4.5 to $7.5 B; focus proceeds on N. America and debt paydown.
  • Expects to be done by 2010.
  • DVN is being marked up this morning as they attempt to break out the value of these assets. The company however will get gassier (by a couple of percent) as a result of the moves which may bring the shares back down in a few weeks as the stock moves into the #2 or #3 gassiest slot amongst the Big Cap E&Ps.
  • This should lead to some potentially good asset buys for APA, APC (they would really like some of the deep Tertiary stuff along with maybe NFX), and the Majors (probably BP and CVX, maybe PBR, PTR).
  • Conference Call: 10 am EST.

Conference - ML Energy beginning Wednesday - we'll have the schedule out in tomorrow's post.

Odds & Ends

Analyst Watch:

  • STP - upped to Neutral at HSBC
  • YGE - upped to Buy at Janney
  • TSL - initiated at Overweight at HSBC
    • interesting to see renewed interest in the lower tier solar names.
  • CRZO - raised to Buy at SunTrust

Interesting Story Watch:

  • MMS To Cut Deepwater Lease Terms. The idea is to make companies drill new leases faster. The result will likely be fewer leases bid on for less total dollars in the Gulf of Mexico. License rounds off West Africa however will do just fine.


176 Responses to “Monday Morning And All Is Sort of Green Looking”

  1. 1
    zman Says:

    Somewhat surprised to see futures set for as strong an open as they are after the data this morning. May not last. Was reading over the weekend a number of articles pointing to hedge funds locking in 2009 now and planning for 2010 instead of looking for a sprint into year end. I bet if the S&P solidly closes above 1100 that next week’s articles will be more along the lines of looking to that year end sprint.

  2. 2
    BirdsofpreyRcool Says:

    The Good News/Bad News continues —

    Retail Sales were stronger than expected, when including Autos; and right at expectations, excluding autos and gasoline.

    Empire Manufacturing (New York area) came in at 23.5 vs 30.0 expected and 34.6 last month.

    Robotic Hamsters Sell Out at Walmart as Season’s Must-Have Toy; retailers can’t keep the product in stock; Target is limiting the amount each customer can purchase. Toys R Us’ CEO says they are the most popular toy since he has been at the company and one of the most popular in history – Bloomberg

    Climate change – world leaders decide to end goal of reaching legally binding climate deal at the Copenhagen conference scheduled for next month; task will now be kicked down the road. NYT http://www.nytimes.com/2009/11/15/world/asia/15prexy.html?partner=rss&emc=rss

    The move out of cash by retail investors remains slow. Of the $660bn of cash (retail money funds + bank deposits) that US retail investors accumulated post Lehman bankruptcy, only $110bn or 18% has been unwound so far.

    Swiss Watch Makers See Rebound. Swiss luxury-goods makers Compagnie Financière Richemont SA and Swatch Group AG Friday said sales are beginning to rebound amid improving demand, particularly in Asian emerging markets, adding new vigor to industry hopes that well-heeled consumers may return ahead of Christmas. [WSJ] http://online.wsj.com/article/SB10001424052748703683804574533701838980082.html?mod=rss_whats_news_us

  3. 3
    zman Says:

    Pack – saw your tweet. Data “sucks”? No surprise is right apparently. I thought the magnitude of the September revision to retail sales was large. I guess no one cares. Don’t forget Empire State was lousy and no one cares about that either.

  4. 4
    zman Says:

    Thanks BOP – re robotic hamsters. You can still get them on Amazon for 4x the retail price.

  5. 5
    BirdsofpreyRcool Says:

    More on the Bad News side (from TPH)

    Port of Long Beach stats ($77/bbl) – October loaded inbound containers -22% y/y and only +1% vs. Sept. No green shoots as imports into key West Coast Port no bueno. Says US diesel demand not likely to improve in the near term (less “stuff” to truck to market) and may suggest US retailers going into Holiday shopping season with lean inventories…so don’t wait to last minute to buy your kids “Tickle Me Elmo”. Or one for yourself if that’s what you’re into.

  6. 6
    zman Says:

    BOP – another site on that that I look at each day:


    Little blue number in the upper right hand corner of the screen. Shows their truck loads in the U.S. I try to check it daily at about the same time…flat line to slightly up of late at about 2,000. Two years ago this was 4 to 6,000.

  7. 7
    zman Says:

    WLT at new 2009 high.

    WLL working on it. No L&C news today, just announcement of their dividend on their perpetual preferred. Interesting way to play the name too.

    BOP or Eli, you guys ever look at that one?

  8. 8
    BirdsofpreyRcool Says:

    Tech Trader was not very convicted this morning… but he was on the correct side (so far) with a 55/45 LONG call for today.

    HeadTrader says with the gap up at open, he thinks it’s choppy trading from here. BUT, he adds that if we close over 1100 on the SPX, he thinks it will be a slow melt UP for the general market, thru the end of the year.

  9. 9
    zman Says:

    BOP – wow, strong last sentence.

    Interesting deal at DVN – does present good comps for some names around here as you said in your early morning email to me.

    Will be on the DVN call in 15 minutes.

    I think APC is likely to snatch up several of DVN’s deepwater targets.

  10. 10
    zman Says:

    Does anyone have the Merrill Energy Conference schedule for this week?

  11. 11
    VTZ Says:

    Did anyone hear Art Cashin in pre-market saying that a geopolitical event would cause people to run to the dollar and flee from oil and gold.

    What is he smoking these days?

  12. 12
    BirdsofpreyRcool Says:

    z — re#8… I have to agree with HT… the global consumer is showing signs of life. We’re lagging here in the US, with the weight of Govt sitting on our heads… but, there are signs that Washington might not be able to jam thru their most populist (and costly) programs. If that happens, you will get a pick up in US hiring…

  13. 13
    zman Says:

    V – I know, he used to be good, pretty much stuck clock now. I heard him say it this year on 9/11, and pretty much every week since, including last Friday and this morning. I’d guess he’s pretty short.

    Bill – do you know TGH? On CNBC now. Cargo containers.

  14. 14
    zman Says:

    TGH CEO saying they are leasing a lot of 40 foot containers in Honk Kong now (consumer goods). Have been watching the drybulk rates rocket and scratching head. Interesting.

  15. 15
    Jerome Blank Says:

    Stand-out weakness in HDY this morning… near a buy or problem?

  16. 16
    Nicky Says:

    Morning all. Nobody has mentioned that last months retail sales were revised down. No doubt this months will be too in due course. Empire State way weaker than expected too. Listened to Gartman on CNBC this morning – this is a bubble and in particular gold is a bubble and according to him anyone that can’t see it is nuts. Of course this whole market is now a bubble – 100 up on a day with crap data – what else can it possibly be. If there is any chance we are going to see a healthy market this needs to correct. If it doesn’t we have armageddon ahead and the Fed will have no bullets left to fire when it hits. A stock market rally at the expense of everything else is not an economic recovery! Rant over.
    TA wise. We have a 20 day cycle due to peak by the 18th November, should lead to a correction into the end of November. Resistance is here at 1108, 1110,1121.

  17. 17
    zman Says:

    BOP – re 12. Yeah, kind of think we see a bit of step up when DC goes on vacation.

    Morning Nicky – see #3.

  18. 18
    zman Says:

    DVN call ongoing.

  19. 19
    VTZ Says:

    BOP – After , I’m taking back my bullishness for the broad S&P in 2010 from last week, until I see more strength in the consumer (you must have caught me off-guard that day :)). The falling dollar could be a driver to maintain the estimates where they are though.

  20. 20
    Nicky Says:

    Z – re#3 – just spotted it. Thank heavens you can see this for what it is.

  21. 21
    zman Says:

    DVN – making a good case for maintaining a strong liquids to gas balance post divestiture. I left out their growth in liquids from Jackfish oil sands in Canada so they will truly only be slightly more gassy post deal. Street really liking this. Having a positive pull on other E&Ps as people look at them and think of the broken out asset values.

  22. 22
    zman Says:

    Nicky – I just seem like a bull. I do try to look at all the sides. On the Empire State, that data often is wobbly. Sometimes the Street pays attention to it, like two months ago, and sometimes not at all. I have noticed that a dip there often precedes a dip in either Chicago PMI or industrial productivity.

  23. 23
    zman Says:

    Jerome – HDY would all be just technical. Nothing to go wrong unless it is political. They don’t have anything turning to the right and probably won’t until late 2011. May be an opportunity.

  24. 24
    zman Says:

    WLL acting like someone is thinking L&C news is soon.

  25. 25
    Nicky Says:

    Z – I actually think most of the data is irrelevant as its backwards looking. That said retail sales are interesting but you only have to go into the stores to see they are empty. I still don’t believe that the consumer believes in this recovery and even if they did they don’t have the money.

  26. 26
    zman Says:

    T Boone headline on the tape:

    Bought 1 mm shares of MMR and SD during 3Q09

  27. 27
    BirdsofpreyRcool Says:

    T Boone also adding to his stakes in APC, Cabot, CHK, DVN, and Forest

  28. 28
    zman Says:

    Nicky – hear ya, depends on the chain. Our BBY and TGT are pretty crowded. HD and LOW not so much. I didn’t go by S.

  29. 29
    zman Says:

    Thanks BOP – he’s making a sector bet then. I thought his stock fund went out of business. Wonder if this is personal cash.

  30. 30
    zman Says:

    BOP – and it’s a natural gas bet too.

  31. 31
    Nicky Says:

    Financials are not participating today by the looks of things. A reminder that it is always commodities, namely energy, that rallies towards the end of these moves so it makes sense to see oil heading up at this late stage of the rally.

  32. 32
    BirdsofpreyRcool Says:

    z — guess T Boone is in “buy low… hope-to-sell-high-someday” mode. That tends to work well, for the patient.

    An indicator i’m looking for… when Sam Zell starts to roll back into commercial realestate. It won’t be today, tomorrow, or even next month… but, when he does, THAT is worth noting on your calendar.

  33. 33
    zman Says:

    Nicky – That and oil took it on the chin Thursday and Friday on weak looking demand numbers and a rally in imports (still below seasonal trend). Given the level of OPEC cheating it is pretty clear China is still sucking up more oil than people think as the extra barrels are certainly not coming to the U.S.

    Also saw another deal with Qatar to ship more LNG to China. China = hydrocarbon black hole.

  34. 34
    zman Says:

    BOP – checked with my real estate contacts over the weekend. They are savvy guys and both see it getting worse before it gets better (bottom in late 2011 or 2012).

  35. 35
    zman Says:

    Putting Jat on the XMAS list for sending the Merrill schedule. Thanks man.

  36. 36
    john11 Says:

    KOG November presentation, has their bakken acreage increased?

  37. 37
    Nicky Says:

    Z – I would like to see the highs tested or exceeded in oil for pattern completion here.

  38. 38
    Nicky Says:

    Just my two cents worth on real estate – top end has not even started to roll over yet but it will be the next to go.

  39. 39
    bill Says:

    dvn is going to look like chk without the debt

    they love the barnett and haynesville and appear happy with 6 ng

  40. 40
    VTZ Says:

    In the Not-Sure-Everyone-Is-Noticing-But-They-Should Department. The dollar is making all its new lows and Gold is making all of its new highs in Asian trading recently.

    This has also been frequently happening over the past couple years although until recently the rallies were beat back by strong selling in the North American sessions.

  41. 41
    zman Says:

    Re KOG – that shows 60K NET. Wow. That’s different, was 35.5 last I saw. BOP? West?

  42. 42
    john11 Says:

    Yes that was my recollection Z, re KOG.

  43. 43
    zman Says:

    Knew they were in Red River, didn’t realize it was that much.

    Presentation still shows 35K in the FBIR

    Also acreage in the Grizzly area – think NFX is over there, CLR too, maybe MRO, HES, will check.

  44. 44
    BirdsofpreyRcool Says:

    re: KOG, their FBIR acreage has not changed…. and they always had the other stuff, but no one used to care. With the play expanding and other productive horizons popping up, KOG’s “other” Williston Basin acreage position is looking more and more interesting.

  45. 45
    bill Says:


    im not familiar with the name


  46. 46
    zman Says:

    Nicky – that’s what I hear. And on the residential front, the high end still has a ways to fall. One of my guys is in a high end tower in Miami. Says it is off 30% and thinks it will be off 50% so he’s renting and renegotiating his rate lower until he decides to buy.

  47. 47
    zman Says:

    Bill – Sounds like they build/lease the containers themselves. Might be a good source of info. Guy was pretty no nonsense, sees down 10% container rentals in 2009, first time they will be down in 50 years. Already sees a better 2010.

  48. 48
    BirdsofpreyRcool Says:

    Nicky #38 — that’s what Zell says about commercial realestate too. He commented that buyers and sellers are still way too far apart. With sellers still 30% above what Zell thinks the clearing price is. 30% is still a long way to fall, but he’s talking his position as a buyer too. Can’t just listen to what he says, have to watch what he does. When he buys, so will I.

  49. 49
    zman Says:

    Nicky – Oil basically created a new lower low on this recently elevated range. Probably has trouble with $79.

    On the S&P, head and shoulders trend completely shattered as of last week. It also played out exactly like the last two month ends. I think I will be pretty lightly long going into Turkey Day.

  50. 50
    Dman Says:

    BOP #27 when did he add?

  51. 51
    Nicky Says:

    BOP – let us know when you see him doing that. I reckon its at least two years away and even then there will be no rush. I don’t see a v shaped recovery in housing.

  52. 52
    zman Says:

    BOP and Nicky – and of course, the market will start to discount a recover in the commercial REITs well before it happens. Maybe six+ months.

  53. 53
    Nicky Says:

    Z – next week should be a down week on SPX. Then the rally gets going again into Christmas. Unfortunately it looks very much as if we are going to see this rally to around 1250 into the Spring – then we are going to see a huge down move.

  54. 54
    1520sbroad Says:

    BOP – any impact from the CMBS talf deal that developers diversifed/GSCo. is trying to float today? ONe of my REIT contacts says this could be a good sign at least for REITs/commercial owners with a bunch of cash and stellar credit – could potentially turn them inot buyers of last resort?

  55. 55
    zman Says:


    WLT – Sold the November $60 Calls (WLTKL) for $10, up 26%. I continue to hold the $70s. And plan to roll into December on next set of market red days.

  56. 56
    zman Says:

    BOP – Did you see the new KOG presentation?

  57. 57
    zman Says:

    NG – up 22 cents. People too bearish.

  58. 58
    zman Says:

    Merrill Names of Interest:


    HERO, COG, APC, EOG, WLL (may have news), COSWF, CLB, FST, HK, GMXR

  59. 59
    zman Says:

    Dow Transports screaming to catch up to make a new 2009 high. This is one of the things the bears have been talking about as a lack of confirmation of the Dow and S&P rallies.

  60. 60
    zman Says:

    re 59. That’s .TRAN on my system.

  61. 61
    BirdsofpreyRcool Says:

    1520s — the asset-backed mrkt has been coming back, quietly but steadily. This is “good” for all sorts of capital assets. If you could watch the CMBS deal and let us know how it goes, that is great color.

    z — just glanced thru the new KOG presentation, to look at the acreage position. will go thru in more detail later.

  62. 62
    zman Says:

    CNBC mentioning the BDI. The drybulk ETF SEA is rising. I may play DSX.

  63. 63
    zman Says:

    Crude bumping up to that $79 level.

  64. 64
    zman Says:

    Slide 7 in the new KOG presentation shows location of 10,11 and also the TFS test in the center of their FBIR acreage.

  65. 65
    choices Says:



    The DJ US Real Estate Index has been strong since March and shows no sign of rolling over. Chart of IYR is an ETF based on the index and contains major commercial real estate firms.

    I have seen a number of articles recently that commercial real estate is a collapse that is waiting to happen but so far no indicator-maybe all of the money sloshing around in the general market is keeping this market up as well.

  66. 66
    choices Says:

    Sorry, the two charts above did not copy correctly. IYR is 1X Real Estate Index and SRS is 2x ultrashort the index.

  67. 67
    zman Says:


    WLL – Entered (5) December $65 Calls (WLLLM) for $2.65 with the stock at about $63.40. I plan to exit the $65 tomorrow and the $60 November strikes on Wednesday. WLL speaks at Merrill Lynch’s Energy Conference on Wednesday and they may have news on drilling in the step out Bakken prospect, Lewis and Clark.

  68. 68
    VTZ Says:


    Interesting graphic

  69. 69
    Dman Says:

    BOP – did you see #50?

  70. 70
    1520sbroad Says:

    #61 – will do. My guess is there will be some press coverage of the developers diversified deal. There was an article in WSJ this morning about it. The demand for this type of thing should be the best indicator i would think.

  71. 71
    bill Says:

    dry bulkers doing well with rise in rates. Most have locked in longer term charters so the blip up in rates dont work thru their pl in the short term

    Navios (NM) releases earning this week and i like the name longer term. NM is using conv prefered that pays annually 2 % and converts between 10 and 14 to procure distrested capes. Their operating numbers will improve in 2010 as the new ships come on line. They havent diluted their shareholders as others have done, egle, drys,sblk,exm,etc

    DSX has the lowest leverage in the group

  72. 72
    zman Says:

    Bill – “DSX has the lowest leverage in the group” – meaning they’ve locked in lower?

    DRYS – used to be pretty tied to the spot? For a trade I might do that but there’s all that baggage. Will do a little snooping for others who are very spot now.

  73. 73
    BirdsofpreyRcool Says:

    Dman — sorry. Those Pickens “comments” were pulled out of his regulatory filing for Sept 30th. Shows T Boone held $185.5mm in equity holdings at Sept 30th. He also holds Gastar, Hess, MMR… and added to Suncor and Transocean, as per the filing.

    It’s a 13F filing with the SEC… probably worth pulling up and taking a look.

    14 total holdings, in order = RIG, Hess, DVN, CHK, Oxy, SD, Cabot, Suncor, Forest, Questar, MMR, APC, WFT, and GST

  74. 74
    zman Says:

    Dow Theory guys must be perking up today. Transports less than a tenth of percent from making a new high.

  75. 75
    zman Says:

    BOP – lemme know when you’ve had a chance to checkout the KOG presentation, no rush obviously, just didn’t recall that much acreage in the total Williston, FBIR didn’t change. Good map of FBIR action.

  76. 76
    Dman Says:

    Thanks BOP

  77. 77
    zman Says:

    Crude hit 79 even and backed.

  78. 78
    zman Says:

    Oops, through 79 like a shot now.

  79. 79
    bloodystupidjohnson Says:

    VQ: VQ wants to development their Monterey shale assets, plus they want to pay down some debt. To do this they want to 1. Sell their remaining interest in Hastings or and 2. Get a partner to help development Monterey. Partner would pay around 50 mil (VQ development costs), and help pay for drilling the wells.

    If they can’t to do either, then they will sell common stock — something they don’t want to do.

    The way the stock is acting, it sure looks like the last option might be in the works.

  80. 80
    zman Says:

    Re 68. Wow. That’s just awful.

  81. 81
    VTZ Says:

    I didn’t realize that the midwest is really the only region that has relatively normal employment.

  82. 82
    md Says:

    Bill – In Fridays comments you’re counting on Sept. production of 60 BCFPD.
    I don’t see it happening.
    Just on injection numbers alone LY 300
    TY approx. 285. LY Ike N Gus drove production DN to 52.335 according to your numbers.
    CDD’s are a bit higher YOY.
    Unless Imports dropped and/or consumption jumped significantly it does not seem logical to make up for the difference.

  83. 83
    md Says:

    Sam Zell talking his book. Sell High. Buy low.

  84. 84
    zman Says:

    VQ – assuming the worst for the shares, yep. Typical in this market.

    Re Shelf – Have not forgotten, just got busy. Will have Part III tomorrow.

    V – I didn’t realize the Southeast was so bad. Knew Florida but wow. Part of the problem with graphs like that is the large, agri focused counties make it look worse than it is since they don’t hold a lot of peeps and a plant going down can really tip them to the 10+% category. Still scary.

  85. 85
    zman Says:

    md – I think he was ball parking a base rate. I don’t see it that high either but its close to there.

  86. 86
    md Says:

    If we’re in for a Sept. surprise drop in production which stocks have most to gain.

  87. 87
    1520sbroad Says:

    #68 – holy cow. Nothing like a good graphic.

  88. 88
    Dman Says:

    Z – is it just me or is HK getting no respect?

  89. 89
    zman Says:

    I think SWN is the natural choice in the mid caps. CHK in the large caps. Almost all gas, small 2010 hedge position, and well traded names.

  90. 90
    zman Says:

    Dman – If you mean today, its up 2.2% vs 2.55% for the XNG. I see a variety of green in the group from 1.7% up for SWN to 5% on SD amongst the gassy group. If you mean the last couple of weeks and since the earnings report in particular I can’t disagree. I don’t know what it would continue to fall further in here. The plan is to be the biggest % growth gassy E&P name next year. They are well hedged and will likely add more on the next pop in NG prices. So yeah, its a little weird. I think as the others trade near their highs (except for SWN which is also off a bit) I think there’s an “oh wow” moment and the stocks play catch up. Happened last time just before expiry, I suppose it could again this week which I’d like. They speak at Merrill on Wednesday. Chances are they don’t have anything to add to recent operational comments.

  91. 91
    zman Says:

    Dman – and adding to 90, I’m not alone in either my liking of the last quarter and the currently plan or my shagrin on the recent trading in the stock. Seen a number of broker comments, with price target upgrades, since the quarter. Best I can tell the market wants constant increases in production guidance with less, not more, spent to accomplish it.

  92. 92
    bloodystupidjohnson Says:

    DNR: Last week DNR signed a small deal to get CO2 from Dow Chemical. Since getting future sources of CO2 is a major goal for DNR this is good.

    Also, since it might be that we might be getting a carbon tax, DNR might be one of the few plays on this.

  93. 93
    zman Says:

    Stocks just drifting now. Volumes on the light side.

    Tomorrow we get:

    Tuesday 11/17: PPI (forecast up 0.5%, (up 0.1% on the core)), Industrial production (forecast 0.3%), Home Builders index (19 expected vs 18 last month)

    PPI probably doesn’t matter, IP will as will the Builder’s index.

  94. 94
    zman Says:

    Anyone see a note on CHK this morning, barely holding flat in the face of all this green.

  95. 95
    jat Says:

    Last time I looked at DSX in early September they had 74% of 2010 revenue locked in. I’m not as close to the name as some and have never invested, though, so I defer to wiser heads.

  96. 96
    bloodystupidjohnson Says:

    DVN selling its Gulf of Mexico assets including its Jack discovery. I remember just a few years ago about all the hoop-la over this discovery, and now this. I guess the Gulf is the Roodney Dangerfield of E&P exploration – “just can’t get no respect”.

  97. 97
    zman Says:

    CNBC – Ben just finished a good speech at the Economic Club of NY. Doing the things to encourage price stability and employment. Basically said rates extremely low for an extended period. Said they are watching the dollar but that it was just falling back from its safe haven levels from last last year.

  98. 98
    zman Says:

    Watched Ben’s speech and read a piece by RJ on natural gas that basically said don’t be suckered by a steep fall of in production in the Sept/Oct production reports. Guy is a bear and it shows, no hard data, no comment on Wyoming processing issues in July or lack of them in August. Did wave the LNG is on the way flag, yada, yada, yada.

  99. 99
    zman Says:


    APC – sold the $70 November calls for $0.05, down 95%. Still like the name, just doing a little clean up and these were too far out of the money to matter.

  100. 100
    BossmanG Says:

    Z, do you think BEXP will be affected by anything said at the merrill conference?

  101. 101
    zman Says:

    Boss – yeah, I think in general Bakken excitement will be elevated, CLR and WLL both speaking as direct plays, EOG, XTO, and HES will give the play a good mention as well. I tossed my $10 strikes about this level last week, holding some worthless $12.50s and of course the stock. I like it longer term and will be reloading it in Dec strikes as they will have more news prior to year end.

  102. 102
    zman Says:

    Ben speak making market happy. “yeah, yeah, we see the dollar but we have bigger fish to fry now”

  103. 103
    VTZ Says:

    What was up with that USD spike? Smells like intervention! Gold not buying it and got stronger hahaha.

  104. 104
    zman Says:

    Simons saying that floating storage LNG is down. They are saying a month ago there were 16 ships serving as floating gas storage, now the number is 5. These general hold about 2 Bcf.

  105. 105
    zman Says:

    V – prior to his speech it started moving as they were looking for some strong dollar talk from Ben. They didn’t get it.

  106. 106
    zman Says:


    HK – Added (10) HK $23 November Calls (HKKT) for $0.55 with the stock just under $23. Theory is the stock has been neglected since the earnings call due to weak gas prices and is due a move up. They speak Wednesday at the Merrill Energy Conference.

  107. 107
    zman Says:

    Terranova on CNBC saying you want to be in high beta commodity names; natural gas and coal. I remember him saying to be out of commodity names last week or the week before when oil pulled back on day.

  108. 108
    jiveyjr Says:

    BEXP breaking out on 5 min chart….

  109. 109
    bill Says:

    72 meaning they have the lowest amount of net debt outstanding ie capital structure

  110. 110
    zman Says:

    Ok, thought you meant leverage to rates, not leverage leverage. Thanks.

    WLT at 71, BTU rallying sharply as well, general commodity upswing.

    Bakken names all moving well, NG less so but moving.

    Big move for SLB, still holding some higher strikes from late last month there.

  111. 111
    West Says:

    KOG, Total acreage for Williston Basin which includes net acreage of REZ 35,00ac, Mon-Dak-2,700 and Red River play in NE Montana 22,600. At the end of last year that had written off most off their acreage that was not producing. In recent presentation they have started to show this acreage again. The have current production in both of these others areas but it is not very significant. By the way Z WLL is going to have a good well in the Lewis and Clark area, it is flaring gas at this time, according to field reports.

  112. 112
    zman Says:

    Thanks much West. There CEO almost said as much on that last call. Wondering if they have it for the Wednesday presentation? They have around 107K acres in the area and its all high working interest. Lots of well sites on that if you think 2 per 640 (1 Bakken and 1 TFS per section).

  113. 113
    Nicky Says:

    I thought Ben Bernanke’s speech was very bearish for fundamentals – lots of reference to potential downside and things not recovering as they had hoped. As Santellis said afterwards he is BB is hardly likely to say there is a bubble in the credit market even if there is! The market could not care less about his speech. Greenspan’s ‘irrational exuberance’ springs to mind.

  114. 114
    Nicky Says:

    Meant to add that the SPX PE is now at historic highs – 150. No worries.

  115. 115
    zman Says:

    Nicky – when was the last time someone cared about a trailing multiple?

  116. 116
    zman Says:

    Crude up $3, solidly through $79. Dollar off pretty hard now. Is there a 1x version of the UUP?

  117. 117
    VTZ Says:

    Nicky – I looked at those numbers the other day from here:


    Then look at earnings and estimates.

    I’m assuming you’re looking at trailing GAAP earnings.

    I also thought they were inflated but if you use adjusted earnings rather than reported earnings (philosophical argument, I know) then the current multiples are high but not outrageous if you believe the estimates. The other day I conceded to BOP that the estimates might be achievable on an adjusted basis, but I thought about it more and I’m taking it back because of the consumer.

  118. 118
    zman Says:

    Thanks for that link V, that’s a good one.

  119. 119
    Nicky Says:

    Z – if you close your eyes then I guess no data matters. But this market is seriously overvalued. Where is the recovery except in the equity markets? This has all been about stimulus for Wall Street at the cost of main street. The market is pricing in a recovery which if anybody even listened to Bernanke is not guaranteed. The irony of all this is that by reinflating asset prices and devalueing the dollar they are creating one more huge asset bubble that later bursts and the government will no longer have the ability to reinflate. Interest rates will rise and that critical window to fix our problems will close and we will be left with 2 problems, a weak currency and a government debt that exceeds our ability to fund it.

  120. 120
    zman Says:

    Eyes aren’t closed but the market is forward looking and you are speaking of a backward looking number.

  121. 121
    Nicky Says:

    ps I didn’t mean to imply your eyes were closed Z. I should have said ‘one’ collectively.

    What was the market seeing when it was at 1450 in October 2007?

  122. 122
    VTZ Says:

    One thing that should perhaps be discussed is how GAAP earnings are completely neglected in favour of adjusted earnings even though the writedowns that these companies are taking could put their balance sheets at risk and cause failures.

    The bank closures each Friday are not slowing down and neither are the people falling behind their mortgages.

  123. 123
    VTZ Says:

    The market was doing the usual extrapolate everything forward, 2 points make a line.

    You and I are on the same page Nicky.

  124. 124
    zman Says:

    Good question, don’t recall what the estimates were like back then. Trajectory was certainly higher. I’m not saying everything is fine and dandy, just saying that if EPS are $75 for 2010 now (that’s what they are on an operating basis in that spreadsheet which is what I’ve seen elsewhere), they will likely be higher within a 3 or 4 months, so call it $80 and that that forward multiple isn’t that bad (13.8x).

  125. 125
    VTZ Says:

    Nicky – RE 119, I think that the long US treasury bond is the biggest bubble of all and it was causing the strength of the dollar (that in fact was the bubble, not the recent and coming weakness). Now that bubble is ready to pop and people know that it wont be good for the USD.

  126. 126
    Nicky Says:

    VTZ – good!

    What I don’t see is how even the bulls can argue this is a new bull market – this is acting like a bear market rally. Bull markets do not go up in a straight line.

  127. 127
    VTZ Says:

    Also, the mid to high 74s is the last chance the USD has before 72.

  128. 128
    zman Says:

    Wonder what the gnome on the mountain top is thinking now.

  129. 129
    zman Says:

    Nicky – volumes are very light on this new high. So I don’t think a lot of arguing is being done. Just people coming thinking they’ve “missed it”. Volumes probably peak later this week for November with little action next week (could still be volatile but I can tell you this kid is taking the Friday after Thanksgiving off).

  130. 130
    Nicky Says:

    VTZ – yes totally agree with T bonds. There is a h and s pattern with a neckline around 112. Should this break we are looking at a target of 82.
    Finely poised right now to go either way.

    Z – I was thinking more about if the market is forward looking then we know it is not always right. I remember when the SPX hit its highs in 2007 people were calling for Dow 20,000. It meant nothing.

  131. 131
    Nicky Says:

    Z – re 129 – good to hear as the market is gonna need you in the shops for Black Friday!

  132. 132
    zman Says:

    Nicky – fair enough. I think earnings will grow more than the current estimates show. A function of that higher productivity coupled with a small advance in volumes next year and stabilized pricing for things like oil.

  133. 133
    zman Says:

    Nicky – bought a couple of new dressers for 75% off on Friday (were a grand, bot for $250). So the shops don’t want me because I like to play on the mid.

  134. 134
    zman Says:

    BEXP running hard, up 75, still doubt they get to my $12.50s. May add some Decembers soon.

  135. 135
    BirdsofpreyRcool Says:

    You don’t have bubbles until you have irrational exhuberance (EVERYone is at the Party) heated up by extended leverage (“mortgaged my house to the hilt and put it all in the stock mrkt”).

    The only “bubble” I see out there is the Party that the Democrats are holding, to pass every economically debilitating social program out there fueled by overborrowing in the U.S. bond market. That is the bubble to fear. Any indication that there might be the wherewithall (and public will) to put a halt to all that nonsense, will keep this rally in tact. The fact that the HealthCare Reform Bill (travesty) has been dealt a set-back (due to the ridiculous provisions found in the fine print of the actual House bill), combined with the public retreat on attempting a binding Climate Change agreement in Copenhagen, has given the U.S. (and global) markets a fresh reason to rally.

    We are in an economic recovery. It’s not a strong one, b/c we still aren’t sure what governmental burdens, costs, and restrictions will be placed on U.S. business. But, it’s a recovery nonetheless. I don’t see a stock market bubble. I see risks of passage of stupid Govt programs and unneccessary “regulation” and taxes. I see the (very real) potential of a Govt Bond (Borrowing) Bubble. But not a private sector bubble. Those were popped in succession (internet stock market, home prices, commodity speculation… leaving only the bubble attempting to blown on the back of the US taxpayer).

  136. 136
    BirdsofpreyRcool Says:

    OK… i know i sound like a Snorting Bull. I’m not. I’m just trying to make money. And the best way to do that is from the long-side right now. Not leveraged long… I’m not that stupid. But short isn’t working so well right now…

    That said, it is not a V-shaped recovery. I never said that. I don’t believe that.

    Sorry, gotta run… just checking in every once in awhile (to piss people off, i guess)… 😉

  137. 137
    jiveyjr Says:

    I personally don’t care why the market is rallying and don’t care to hear what political reasons one wants to attribute it to. The fact is the market is rallying, there is money to be made and far too much of what’s been on this board today is about one’s personal bias be it about politics or what the market should or shouldn’t do.

  138. 138
    Nicky Says:

    BOP – some great points as always. However I beg to differ on the reason for this market rally. At this stage it doesn’t need a reason and they are buying the market whether the news is good or bad and have been now for nearly 9 months. I personally don’t see it being caused by the Health Care Bill or the Climate Change bill but I may be totally wrong. It may not be a bubble yet, but if I said to you that within 3 months the SPX would be at 1250 without any sort of significant pullback in between then would you agree that it was looking bubbly? Maybe I am nervous because I feel like this is deja vu – 1999. Ask anyone and they say you have to buy this market! Why? Like people are now asking how they short the dollar.

  139. 139
    zman Says:

    Jivey – it’s a very slow news day.

  140. 140
    BirdsofpreyRcool Says:

    jivejr — fair enough. But politics are driving the private economy to a greater extent than in recent history. I would love to ignore what is going on in Washington. But, I can’t. It drives the markets, so I have to watch and determine the impact. I will try to keep the emotion out of it. Fair enough.

  141. 141
    BirdsofpreyRcool Says:

    Nicky — by the way… your input and thoughts are GREATLY appreciated!!!

  142. 142
    jiveyjr Says:

    sorry to have posted #137…did not and do not intend to run anyone off..

  143. 143
    zman Says:

    Meredith Whitney saying she sees double dip recession. Hasn’t been this bearish in a year. Talk about trying to top the market.

  144. 144
    zman Says:

    Was Whitney’s piece already in the WSJ?

  145. 145
    Nicky Says:

    jiveyr – point taken. I get exasperated/worried which likely makes me sound very bearish (remember I am not super bearish yet as I see a rally into the Spring and a downdraft into the end of November from somewhere in this area). As I just said to Z – the charts and cycles further out look extremely bearish and if I can stop just one person losing their shirt when the moment comes I will be pleased. Has Meredith saved me?
    Okay if we were to close below 1105 then there is a good chance the 20 day cycle high is in place and we head lower into the end of November. I am slightly dubious about this call as Opex is normally pretty bullish. That said when it is bearish its very bearish!

  146. 146
    jiveyjr Says:

    again, I’m very sorry to have put that out…fwiw, I’m an accountant by trade and have followed the PE on what I call an as reported basis without all the excuded items and happen to pretty much agree with you Nicky…and as for BOP, I think your contributions are spectacular…don’t take offense…that’s what I thought and I was too brutal in expressing it…very much wish I hadn’t but you know how it is “a card laid is a card played”

  147. 147
    md Says:

    Nicky – What levels do the charts indicate further out

  148. 148
    zman Says:

    Thanks Nicky, got levels?

    Whitney was beating the consumer last week, makes sense for her to comment on the banks. I didn’t hear her thoughts on commodities. Oil is going to be a lot more dollar and 2nd and 3rd world demand recovery related this cycle than in the past. Why anyone analyzes banks in the first place is beyond me.

  149. 149
    Nicky Says:

    The 20 day cycle ‘should’ top between 1110 and 1121. Should top no later than 18th November. Then we should head back to 1070 on the SPX at a minimum.

    Further out I don’t think this tops until see a 61.8% retracement and spx could go as high as 1276. But broad topping area is 1158 – 1240. Cycles point to the Spring for that.

  150. 150
    BirdsofpreyRcool Says:

    jiveyjr — no worries! and no apologies needed. It’s probably healthy to reign in my rants, periodically.

    While it feels good to have people agree with my views, the real point is an exchange of ideas and investment opportunities and cautions about market timing and environment. By definition, we are not all going to agree… but — by definition — that helps the overall discussion.

  151. 151
    BirdsofpreyRcool Says:

    Thank you for the levels, Nicky!

  152. 152
    zman Says:

    Thanks, that’s Wednesday, I’m still longer later than I like in the front month contracts. Waiting for a couple of news items and then will be sluggish in rolling longer in all but catalyst driven names.

  153. 153
    zman Says:

    BOP – any thoughts on the WLL perpetual preferred?

  154. 154
    RMD Says:

    I’ve seen nothing to explain CHK weakness: how about DVN reconfiguration makes them more CHK-like and hence substitutable for CHK?

  155. 155
    zman Says:

    RMD – yeah, I had that thought. Also thinking it means increased competition onshore for acreage. Probably not that bad a thing for CHK really as they could see them some and still have way too much.

  156. 156
    zman Says:

    Meant “sell them some”

    Beerthirty, off to an H1N1 clinic. Back in a while. Look for more selling by me tomorrow through Friday with only minor rolls this week for December.

  157. 157
    jiveyjr Says:

    well, I win the award for “ass” for the day…I’ll try and be better in the future

  158. 158
    bondbuddha Says:

    HK has posted a new presentation

  159. 159
    bill Says:



    what do you see this number to be for sept

  160. 160
    BirdsofpreyRcool Says:

    ah, jiveyjr…. it’s a Monday. Don’t be too tough on yourself. No worries!

  161. 161
    bill Says:


    i took the market production for the month and divided by the number of days in the month to get to the month marketed production by day

    Is there an error in this method?

    june 1,813,950 60,465
    july 1,857,342 59,914
    aug 1,869,182 60,296

    i dont see sept being much different than aug maybe sligtly lower

    Maybe my number has imports in it

  162. 162
    zman Says:

    Bill – re 161, yours is marketed production, has Alaska in it which is mostly for pressure maintenance and not market but otherwise its the same number I use. It does not have imports in it, which would add 6 to 8 Bcfgpd depending on the time of year.

  163. 163
    zman Says:

    Jivey – yeah, no worries. I’m the biggest jerk here by far.

    Nicky – Ram asked if you meant people should not be long equities in here, just passing it along as I’m about to head off with the kiddos for shots.

    Bond – thanks, will look at HK’s new presentation.

  164. 164
    zman Says:

    Gotta run but HK saying reserve growth could outpace production growth for 2009. That’s pretty much a sure thing. Going to grow reserves on a faster basis, percentage wise, than production. So that’s reserves up > 60%, which goes along way towards putting them in line with their peers. Historically its been closer to a 1 to 1 relationship.

  165. 165
    bill Says:

    bdi is over 4200 with 1 spot cape rate at 100 ,000 +

    how long it lasts ..who knows


  166. 166
    zman Says:

    HK – out with new Oil prospect called “Red Hawk” to the northwest of their current Eagle Ford activity.

    Fist well spuds next month.

    $4 mm spent so far to leased 89K acres in Zavala County, Tx.

    Market should very much like the idea of them adding oil exposure.

  167. 167
    john11 Says:

    Brigham Exploration Announces Lee 16-21 #1H Bakken Well Produces at Initial Rate of Approximately 1,544 BOEPD.


  168. 168
    bill Says:

    167 good for useg as well

    story on dry bulk


  169. 169
    tomdavis12 Says:

    Z: Some thoughts re CHK. Their problem is still credibility. The stock was an above average performer last week and YTD. So they do get a little slack. Some sell side analysts are pointing out in the third quarter their cash spending is still above their organic growth. They promise monetizing their assets but their VPP’s have not been timely. On the CC they said they are talking to many buyers. In an envoirnment where the sell side guys are bringing down their model numbers they will believe ONLY when it happens. Historically Aubrey promised they would be investment grade in ’05. His response to not being investment even today is that “We have always felt like we are investment grade”. When he found Haynesville he could not help himself. You can make a case that without hedges this is the riskiest position CHK has been in some time. It seems that CHK is the poster boy for uncertainty in the NG market. Remember ’98.

  170. 170
    PackMan Says:

    Z – been busy all day … #3, yeah, nutty.

  171. 171
    PackMan Says:

    I think these Bernanke speak days are rally days b/c GS and JPM want to make sure Ben gets shown in a good light for all the free money he is showering on them.

  172. 172
    Nicky Says:

    re 164.

    In response to Ram. No I am not saying do not be long equities. You have to go with the trend for as long as it works. That said I personally am looking for a pullback in this timeframe which will last for a week or more so I think you can look to get long from a better area.

  173. 173
    PackMan Says:

    Nicky 16 — good one…

  174. 174
    BirdsofpreyRcool Says:

    Market Strategist Summary of Today’s Market action and events.

    With the exception of the volume, today’s push to new highs on the S&P 500 was a textbook technical breakout. Compensating for the subpar volume is the leadership rotation that has been occurring. For the overwhelming majority of the move since the March low, Technology and Financials have been the leadership sectors. Technology remains the cornerstone, but Financials peaked on October 14th, approximately 6% above their current level of 200. That 200 level is now serving as resistance and this is an important test for the sector. As Financials have faded from the market leadership, new leadership has emerged. Of the 10 major S&P sectors, 6 registered new 52 week highs today. The four that did not are Financials, Energy, Telecom and Utilities. Telecom and Utilities combined only comprise 6.6% of the S&P 500. Although it is not making new highs, Energy is the best performing sector quarter to date, up 8.7%. Of those six sectors that registered new highs, Health Care is the laggard of the quarter to date, up 4.85%. All have posted balanced gains in the 5%-6% range for the quarter. The broadening trend has taken 3 quarters to materialize, so it will be surprising if it fades before year end.

    Bubbleless Ben
    The Fed Chairman provided his outlook for the economy today at a speech in New York. To sum it up simply, the Fed Chairman is happy with the progress that has been made, but like everyone else, he is concerned about the likelihood of a weak recovery. Like many, the Chairman views the Q3 GDP growth and the anticipated Q4 GDP growth as artificial although instead of that term, he uses the term “temporary.” He noted that “My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely. However, some important headwinds – in particular, constrained bank lending and a weak job market – likely will prevent the expansion from being as robust as we would hope.” The balance of the Chairman’s speech reinforced where he sees the weakness and the potential setbacks. This was a further and more in depth explanation as to why the FOMC provided additional explanation on the “exceptionally low rates” for an “extended period” language at its meeting earlier this month. He even reiterated the language from the FOMC statement in his prepared remarks today. Undoubtedly, he reinforced a very dovish stance.

    For the past nine months, we have been pounding the table to convey that the Dollar weakness over that time was from a healthy re-risking in a post-Armageddon world. We were encouraged to see that the Fed Chairman shares a similar view (not that it makes our assessment right or wrong). The Chairman remarked that, “When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains. The Federal Reserve will continue to monitor these developments closely.” From this, we extrapolate that the Chairman also shares our view that since this process is now complete, the Dollar is currently at an appropriate level.

    Considering nearly every asset class in the markets, Equities, Credit and Commodities, have all been called bubbles by various market participants and the media, the Chairman made the highlight comment of the day during Q&A. In response to a question regarding asset bubbles, the Chairman commented, “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.” We wholeheartedly concur with that assessment. Whether you agree or not, it is not often that a Fed Chairman gives such a candid response, especially one that is akin to a blessing for the current level of asset prices.

  175. 175
    RMD Says:

    tomd; CHK, well said; it will take a long time to win back credability, and not changing course midway again would help, as would managing the company rather than the stock price.

  176. 176
    VTZ Says:



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