Wednesday – Oil Inventory Preview

158 thoughts on “Wednesday – Oil Inventory Preview”

1. dry bulk stocks will be up today with the exception of drys.

   exm,nm,gnk,dsx,egle >should do well

   Rates continuing to improve

   Nm beat by 5 c, 21 vs 16 cents

   http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzU5OTg2fENoaWxkSUQ9MzUyODY3fFR5cGU9MQ==&t=1

2. Re Shipping rates – still have not figured out why they are rising so much.

3. EOG BofA presentation in 10 minutes.

   New presentation here:
   http://www.eogresources.com/media/slides/BOAML_1109.pdf

   Stresses them becoming a more balanced (gas vs oil) NAM producer.

4. nm says demand is strong

   risks in 2010 is new supply of ships and credit still not there

   bdi up again today

   gnk will open up a buck

5. EOG

   2009: 64% natural gas
   2010: 56% gas
   2011: 50% gas

   Little new on Bakken, Bakken Lite, Barnett Combo oil plays.

   Touting themselves as a leader (based on IP’s > 15 MM/d) in the new Haynesville Core – E. Texas.

6. Good morning, AEZ has a favorable technical setup,breaking above its long term P&F trendline, is this stock fundamentally sound and do any of our members follow this stock?

7. Re 4 – demand for some ships stronger than it was I get, but there are still an awful lot of idled ships. Not exactly booming amount of trade right now. Coal and iron ore moving but at lower rates than year ago. Other bulk way off to the U.S. at least. Just wondering with an armada of ships bobbing off Singapore why rates have jumped from $30Kper day not long ago (October) for Capes to > $80K per day now.

8. Jerome — I know of one member who follows AEZ closely… but she never comments on the board. Maybe we can ask her “pretty please.” She is one of the best analysts and money managers I know. Miss N… you know I’m talking about YOU. Can you say anything about your work on AEZ??

9. TechTrader in today with more of the same… 60/40 LONG trade is the one that works best today.

   HeadTrader backs him up with the statement that he would be a buyer on any morning dip, as he sees an upwardly, but choppy, day.

10. EOG call in 20 minutes, not now, like I stated above. Nothing really new in the rest of their presentation.

    BOP – any thoughts from the HT/TT?

11. Oops, you got that in just before I hit enter, thanks.

12. Stocks unlikely to do much before EIA data

13. Art Cashin mentioning something less than bearish this morning, that the lower than expected housing starts may be a function of poor weather. Personally I think we need to work through some inventory before we jump back to higher rates of construction….doesn’t make a whole lot of sense to put up new shacks when there are so many recently built empty ones and mortgage delinquencies continue to rise.

14. Wish the builders would stop for a couple of months. They just seem to be adding insult to injury. Laying off adding to supply would be a great thing. So, frankly, I took the lower start and permit info this morning as a positve step in that direction.

15. AEZ has acreage next to BEXP’s Rough Rider wells. Expectations are high, but they are proving very slow to sign up a drilling partner. No annoucement with 3Q results was bad. They have always said there will be drilling results by YE – but the clock is ticking.

16. AEZ while I am not one of the best $ mgrs and analysts Z knows, the AEZ story , as I u/s it, is lots of acres literally next to BEXP’s (this from the BEXP analyst tour). A non-operator like NOG, but nothing drilled yet. Said a month ago a JV announcement was immenent (shades of MMR). Drilling and production will increase mkt cap because stock can be valued on production/reserves, not just acres/share.
    Fetter project in WY got a JV announcement, some think that’s a lost cause.
    I’m long.

17. EOG call started

    BOP – couldn’t agree more with 14. Would like to see TOL take a few years off.

    WC – thanks, I don’t follow it, will drop it on my list of Bakkens and have a look.

18. rates are soaring

    cape today hit 100 k per day

    http://reports.platou.com/FixtureReport/Pages/BulkFixtures.aspx

19. Thanks for the comments on AEZ. Any of you care to reveal your NAV-based price targets?

20. Bill – rates are soaring but are also very volatile. I want to know why they are soaring. They have a habit of soaring and then collapsing.

21. Intra-day comment from X-Asset Class Strategist #1 —

    It Just Became Dangerous to be Short Financials!

    Looks as if ABK has avoided bankruptcy and that it will remain a going concern…. ABK stated that its “Surplus as regards policyholders amounted to approximately $856 million as of September 30, 2009.” This is a big deal and could cause a shift in investor expectations and trading momentum in the financial sector.

    Over the past two weeks we have written multiple times that bearish sentiments related to ABK were completely overdone and that the company will not be forced into bankruptcy. Nevertheless, the potential that ABK would file bankruptcy (led by the rantings of JPM and Credit Sights analysts) was also a reason why the equity and credit market performance of other financial services companies have also suffered recently, in our opinion.

    We expect that the clearing up of this “credit event “ reduces the amount of systematic risk that the market might have had to confront. It could also cause the recent increase in financial sector shorts to quickly reverse.

    This event is also likely to spur another “toxic asset” revival in which companies like ABK, BMI, RDN, and PMI begin to rise again. This is also likely to buoy the broader markets.

22. EOG.v is my largest penny stock holding. Lot of warts..especially management..but holding the ONLY undeveloped CO2 reservoir in US.
    Tried to partner with bid process this year but no go BUT I think it will happen….maybe for my grandkids!!!…

    New reserve report today.

    http://finance.yahoo.com/news/Enhanced-Oil-Resources-Inc-cnw-857277010.html?x=0&.v=1

    “The results of the Cawley Gillespie reserve reports have confirmed the value associated with CO2 flooding of these fields where independent engineering firms have estimated that approximately 50 MMBO could be recovered at Chaveroo and Milnesand by full field CO2 injection. Initially these reserves were considered a contingent resource, however, with the CO2 pilot results now behind us we can begin the process of moving those contingent barrels into the various categories of proven, probable and possible. We remain committed to bringing in a supply of CO2 to initiate development of these assets and we will continue to work diligently to achieve that goal. We also continue to have positive results at our Crossroads field and with our current month production averaging in excess of 350 BOPD, with zero debt and an ongoing development program the Company is well positioned for growth.

23. Thanks BOP, wcoaster and RMD on the AEZ comments… it seems noteworthy that AEZ is outperforming on a technical basis in a difficult short term environment…based on the comments is the stock overvalued here? something moved the stock higher on greater than normal vol

24. BOP NAV targets depend on what value/acre the market puts on AEZ’s acres. AEZ is about $1,300/ac now, while BEXP, NOG, KOG are $5,000-6,000 after allowance for other proven reserves. As AEZ gets drilling via JV, valuation has upside. Needless to say, I dream big.

25. Perhaps a bit of useless info but Cramer was pounding the table on shippihg rates and some stks-likes DSX and more so NAT.

26. KOG a bit perky the past 10 mins

27. KOG is trying to breakout above a reformed/longer term consolidation triangle, this would be a 5th test since the middle of september…seems like something is gonna give soon…$3 prints a confirmed breakaout on the P&F chart

28. jivey -KOG- thats because they didn;t fill my buy order at 2.53 and want to piss me off!!

29. Just to update… TT just reduced his odds of a LONG trade working today. HT is sticking with his “choppy, but upwardly moving at some point” call.

30. BOP – I’ll have a back of the envelope on AEZ and one other Bakken tomorrow.

    TT – might have wanted to wait for the oil numbers. Better chance of an imports based surprise on crude (crude draw) and better distillate demand due to approaching weather (heating oil) and building corn harvest (diesel).

31. TT doesn’t care about fundamentals… he is eco-agnostic. HT would agree with you tho.

32. EOG – see second half 2010 gas price pop and therefore not willing to add more hedges now.

33. 21 – BOP – I call BS on that dude … really scraping the bottom of the barrel with that one IMO.

    Z – HK getting pounded again. Any thoughts – short term buying opp here ahead of presentation this afternoon ?

34. EOG Q&A

    35% IRR on Bakken Lite (which is the non core acreage that most other people are in), is at $75 oil price held flat.

    Says $50 is breakeven in the non-core Bakken.

35. Pack – Whole group in penalty box. Do they say something to catalyze the shares. Maybe if oil is still up, if not then no. Lot depends on what happens with oil in five minutes. I’m getting ready to rotate some cash in the ZLT to buy more common.

36. Hey Packman….HK has been pinned at P&F trendline support for what seems like forever, but the bullish trendline is being defended…HK remains on a buy signal until a print of $21, if a trader is bullish on the stock, this is the price zone to consider…on a buy, position size for a sell stop at $21…if $21 prints the bulls would have most likely lost the battle for a time

37. EIA Oil Inventory Report

    Crude at time of report: $79.95, up $0.80

    Inventories:
    Oil: down 0.9 mm barrels
    Gasoline: down 1.7 mm bbs
    Distillate: down 0.3 mm bbs

    Crude imports: not off much at 8.6 mm bopd, still low

    Utilization fell again: 79.4%

    Demand:
    Gasoline: back up to 9.015 mm bpd – that’s good.
    Distillate: 3.6 mm bpd, improved.

38. KOG, is moving fracing equipment on location for # 9.

39. west — that sounds about right on schedule, if KOG thinks they can complete and test #9 by early December. Thanks for the update, west.

40. EIA Cont.

    Gasoline – part of the draw down is a drop in imports – probably due to IDA. Right now, Gasoline up nearly 2%.

    Cushing rose back to 28.3 mm barrels, from pretty low levels. This is one number the API guys seem to get right in terms of both directionality and magnitude.

    Those two items could be the knocks on the numbers being considered bullish. Doubt it hits them though.

    Oil now just over $80. Stocks should wake up to that if oil can stay close to the $80 level which will soon be a function of what the S&P does.

41. BOP/West, thanks, any sense on whether they go ahead and PR #9 alone or do they wait for 10/11 to complete?

42. My guess would be that even though they want to get away from the single well announcements, this well is a little different in that it completes (at least based on their prior comments) the proving up of their acreage.

43. Pack – those oil numbers derisked your idea substantially. Always amusing how players that are almost entirely natural gas (96% in the case of an HK, or 99% in a SWN) trade with oil so consistently.

44. z — if they stick to their original plans, KOG should report #9 results as soon as they have them. After that, I would expect only a quarterly operational update.

45. S&P minute chart and oil. I really think if you are just TA or just FA you are missing out.

46. #43 – i always find that interesting too – there was a day last week that SWN was featured in the WSJ in their daily winner/loser piece in the 3rd section as a loser. Reason – oil prices fell.

47. Morning all. Indices still appear to be working on their wave iv. Would have to break the 1097 area with force for a top to be in place. So likely we still make a run at the 1120 area before a pullback.

48. Z RE 34: Isn’t there a disconnect between what EOG is saying is the IRR in the Bakkan Lite areas, and what other Bakkan companies are saying in their conf calls and presentations.

49. BSJ – Yes, EOG is more conservative on the reserves in the Lite areas.

    Thanks Nicky.

50. WLL – call ongoing, nothing new so far, nothing new that I see in the presentation, looks like the same presentation from 10/30. They should come to discussing the Lewis & Clark prospect area in about 5 minutes.

51. Jerome – to my layman’s eye, WLL is on the verge of a breakout. Any thoughts there?

52. Z RE 49 – maybe we should remember that when the new SEC rules go into effect and some companies see large jump in reserves.

53. Cramer loves nat–its the last one i would by due to tanker rates being low

    On the bulker side, it appears exm has some spot coverage which means they benefit from rising prices

    nm is locked in this year and 65 % covered in 2010

54. KOG, 10& 11 should be excellent short wells, remember that they were not able to frac all zones on the #2 and had a fault on # 1 that they had to backup and redrill to get back into payzone…….Does anyone else follow XEC here? Breaking out third Yeagua well by Beaumont should be hooked up and following and 4th well completed by the end of the year. These should make about 20mmcfpd and 1500bopd each. They have 7 Cana-Woodford wells that they are completing that will be liquids rich. They have 91,700net acres in the Granite Wash play just north and west of NFX Stiles Ranch. They have 300k net acres in the Permian Basin and will increase rig count to 11 by Mid January, layered cake oil play.Link to yesterday’s BOA pres: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA5OTR8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

55. Re: #51, I agree, WLL has tested $65 four times since 10/19…what I like about this consolidation here is that WLL is now holding the 20 day SMA as support, the 5th test of $65 could be the break higher, WLL stays on a P&F buy signal from here until a print of $60

56. West – was going to go back and listen to XEC, I watch them but don’t actively follow it. Am considering changing that for 2010. Have been around companies making hay about Yeagua and Frio wells many times. That rate sounds biggish.

57. Since people on this site love finding out what the stock gurus think I found this site interesting. This is a grading of the record of some of these gurus.

    http://www.cxoadvisory.com/gurus/

58. WLL – Lewis and Clark – Three Forks Prospect.

    Bought from Burlington in 1992. Held by production.

    Please with drilling results so far.

    Complete by end of the month, probably won’t announce it as a separate well, will announce with a group of wells in a press release before year end.

59. Re 58 – that may disappoint some short term holders looking for a pr on the well or more data today. If it starts to slip independent of oil and the market I will punt the Novembers as we’ve just had the catalyst of L&C pushed back to at least early to mid December.

60. VTZ – you got that inverse h and s target for gold at 1325? If it goes parabolic then that is very likely I think and then it will absolutely collapse.

61. Re WLL – post nothing new on L&C. Small sell down with market on no volume. Volume increased off the lows to get it back into flat territory on the day. Holding for a bit longer.

62. Shork:

    http://www.cnbc.com/id/34014644

    I know how you love him Z!

63. BSJ: Thanks for the site. I have access to 5 sell side energy anaylsts. I have shared with Z and he always does a good job sharing anything important. Maybe a few more comments will help all

64. Re 62 – bullet #3 is always the case this time of year. Don’t really see his point as that being different than normal

    He leaves out rising OPEC production and rising Chinese / Indian / Middle Eastern Consumption as a reason for low imports.

    But otherwise I agree. Oh, except for the part of about bigger declines in crude inventories this quarter. Doubtful on that unless we see a rapid turn in utiilization…I expect some but with cracks where they are, where’s the incentive.

65. Re 60: I think there’s a number of ways it can play out but I either expect this rally to make a strong move up to 1250-1350 then pull back or step up and consolidate/rinse/repeat as it has been doing.

    If the dollar breaks below 74.50 then it’s 1350, otherwise if the dollar looks to rally to 78 I would expect a fall back down some point above the breakout level.

    I don’t think that the downside can take gold below 1000 anymore. Anything under 1000 would be perceived as a bargain by China and investors. I do expect a retest of the breakout point but it will be a higher low and then the trader boxes are going to go nuts to 1600? 2000? 2500?

66. Interesting re 60. What about silver which is seriously underperforming at the moment.

67. V – Everyone talking Euro 1.50 as the break point on the dollar. At 1.4974 now.

68. #56, Z, I know this sounds big, and it is still holding up. Here is comment from 3rd qtr cc: The drilling has primarily been in Jefferson County, Texas, right near the edge of the city limits of Beaumont. As you know, in early July 2009, we brought on production in our Two Sisters No. 1, that was 100% working interest well, 75% net revenue interest and that came on at approximately 40 million cubic feet equivalent per day, but that doesn’t tell the whole story.

    That 40 million cubic feet equivalent breaks down to 25 million cubic feet of gas and 2500 barrels of oil per day, gross. It’s still currently producing at that rate. That’s obviously a very, very nice well when we quote 40 million cubic feet equivalent, that’s a 6:1 equivalence ratio of oil to gas and that 25 million feet a day and 2500 barrels of oil with the current relationship between oil price and gas price, that oil is really, really a nice product stream right out of that well.

    http://seekingalpha.com/article/171003-cimarex-energy-co-q3-2009-earnings-call-transcript?page=4

69. Turning into another go no where day.

70. Thanks West, that’s wow-big.

71. V – do you know any way to play palladium aside from the futures?

72. RE The Euro/Dollar cross at 1.50 is a red herring because the Euro has some of the same problems as the dollar. The gold price in Yen probably a better signal that is similar. The breakdown in the USD to the Euro will probably set off more computers though.

    RE 66: I think silver has a massive breakout at some point. SLW is the play my friends for the whole precious metals complex. SLW SLW SLW!! Can’t say enough about that play.

73. RE 71: Not off hand but I expect silver and gold to outperform the other precious metals.

74. Z – any thoughts on CRK here (stock, not options?). As I recall, they are mostly unhedged. Stock has filled the gap from its rocket launch in October.

75. One of my bond clients is recommending TPGL. Does anyone follow this name?

    Tks

76. #72 – VTZ – agreed on silver breakout at some point. Can you give a one paragraph on why SLW vs. others? or even SLV?

77. Ooops I meant TRGL

78. HK – Z, Jerome. Thanks for your comments. Bought some stock around here which I think is good entry regardless of where this goes near term.

79. Dman – I have a friend who bought palladium coins. Has a bag of them in the house. Happy guy despite the wide spread on them.

    Dman – thought the quarter was ok, still unhedged at last check, biggest reason for its pull back. (although HK is 70% hedged and that didn’t keep them from falling well off their recent highs). Nothing stood out in the operations update, stock is middling in terms of valuation. It’s a low cost name which is good, although some folks like HK are going to rewrite LOE/Mcfe for the industry going forward.

80. Of all things they keep pumping to keep market propped are the Real Estate stocks and financials.

    Too easy to overpower the ETFs with HFT trading. Moves all the stocks. My observation.

81. I follow and own TRGL.

82. V – been watching SLW but never seem to get a chance to buy it. It’s now up more than 600% from the lows about a year ago. Sure has some leverage to silver, even if part of that was just financial panic & mayhem.

83. #79 Shoulda thunk of that I guess: actual physical stuff.

84. My client seems to think there is a near term catalyst, do you agree BSJ or have any other thoughts on them?

85. Z – can you remind me what caused the rocket move in CRK in October?

86. NG – down 22 cents, or 5%. Shoulder season volatility.

87. Dman – gassy group started to run a couple of weeks after natural gas bottomed. Right up until a week or so before earnings.

88. Here is a nice explnation of what they do:www.investorvillage.com/smbd.asp$mb=4288&mn=40542&pt=msg&mid8191396

89. SLW is the play because they are simply a large royalty stream of silver. The business model is what wins the day here. They also actively aquire new silver streams and have some coming online or ramping up.

    They are the purest silver stream with no exposure to rising operating costs. Great leverage to silver price increases.

    SLV and GLD are garbage. Nobody should “invest” in those. Daytrades only.

90. Gasoline demand of 9015 Mbopd last week. Same as the number from 2 weeks ago. Exactly. Your tax dollars at work busy sleeping at their desk at EIA.

91. They are currently looking for a partner that could help them in developing the Paris Basin. This basin suppose to have the same geology as the Bakkans.

    The whole idea behind TRGL is that they are a play on taking the new horizontal fac tech drilling methods learned in the Barrett, then to the Bakkans and transfer this to another shale play. This shale play is the Paris Basin.

    This is sort of like VQ (another of my holdings) that is trying to do the same thing in with the Monterey shale.

92. This is very depressing on real estate:

    http://www.safehaven.com/article-15054.htm

93. On TRGL: one major warning, if there was a company that over promised and under delivered this is it. Believe me, from past experiences, this company has the potential to drive you to drink. So buyer beware.

94. UNG printed 8.93, 1 penny below the 9/3/09 all time ETF low at $8.94…wasn’t the front month future near $3 at the previous low?

95. re 94 – yes, just under.

96. RE:#94, are we seeing some sort of bullish divergence in the price action of the EFT and futures relative to conditions which existed in September?

97. Grabbing lunch. Wowboring trading. Will listen to FST call in one hour, then HK.

98. Jerome – I dunno. I don’t like that ETF. It’s just a poorly structured shadow of natural gas.

99. ng is cratering down .25 c

100. ung hit a new low today

     bulker stocks had early profit taking and roaring forward

     i bot calls in nm and exm

101. Bill – Why are drybulk rates rising in your opinion?

102. sd, hk relatively weak today, bought more common.

103. Choices – I’m close to doing the same on the HK. Front month gas down by > 35% in 3 weeks hitting the highly hedged by the same amount makes very little sense. But the brokerage and trading community went from “inclined to be positive” to “bearish” on gas prices with that last monthly report. The attitude is gone to maybe depletion no longer exists.

104. Going to dial down to the 30 min on HK, looking for a reversal candle above $21, HK does seem to be reacting to nat gas…

105. Palladium
     ETFS Physical Palladium ETF

     The ETFS Physical Palladium Exchange-Traded Commodity (“ETC”) is designed to provide investors with a return roughly equivalent to the movement in the palladium spot price, less fees.

     Investment type: ETF (Exchange-Traded Fund); listed on the British LSE exchange
     Ticker symbol: PHPD

     PAL
     North American Palladium’s vision is to build a mid-tier diversified precious metals company operating in mining-friendly jurisdictions. Highly leveraged to palladium, the Company is also building on its exposure to gold, and focused on acquiring high quality near-term producing gold assets.

     SWC
     Stillwater Mining Company engages in the development, extraction, processing, refining, and marketing of palladium, platinum, and associated metals in south central Montana, the United States.

106. AEZ – back of the envelope and giving them no credit for their Wyoming efforts, I can get to $4.50 in a heart beat with some pretty sharp hits to the prospectivity of their acreage and the EURs of their wells. If I put more reasonable assumptions on it they would look very cheap. Anyone with the backstory here want to explain why they want to farm it out so much that they are waiting to drill? Seems odd, especially given cash on hand and $0 debt.

107. alot of ships are already locked in so the supply available for spot trading is relativly small so an incremental demand pushes up the spot rate

     Most demand comes from coal and iron ore deliveries to China.

     Nm mention port conjestion tieing up 13 % of the fleet

108. looks like capitualtion in the gas stocks

     I need to take a walk

109. re 107 – do you mean NM’s fleet being locked in or the global fleet. Last I checked much of the global fleet was bobbing off Singapore with nothing to ship.

110. HK reacting well thus far to the 30 min hammer, day trade stop loss at $21.73, longer time frame trader stop at $21

111. ZTRADE:

     WLT – Sold the $70 November calls for $2.05, up 25%. Will reposition soon.

112. This article compares NG prices to gold.

     http://www.safehaven.com/article-15048.htm

113. Z – has HK mentioned that “Red hawk” block of acreage shown in the latest presentation at any other point?

     who is in charge of their power point graphics?

     #108 – SWN is usually one of the capitulation gauges and they have held up well today

114. 1520

     No – but the Street has seen it and does not appear to care

     No idea.

     About to add another set of near the money HK calls for a quick trade.

115. WILDZTRADE:

     HK – At $22, the stock looks cheap to me. Adding (15) $22 November calls (HKKS) for $0.45. More reasoning available on the site. I may add to the common position down here as well.

116. i added some more HK common. I care.

     Maybe i can get my kids some Petrohawk t-shirts with that bird on them at the annual meeting.

117. 1520 – It seems overly tied to the whipping post. I’ve gone back through my notes and through broker comments. Sell down is largely due to gas prices (despite the hedges) and the capex increase espoused on the 3Q call. People just don’t like the idea of having to sell assets in a weak gas price environment to fund capex for higher return projects. This sell down to me seems quite over done but at this point it will take some analysts to spine up to the plate and reiterate Buys and much higher targets before it moves. Maybe one of them does that after the BofA presentation, if they provide some new color. Either that or the dollar falls out of bed later this week and spikes commodities higher.

118. For the common, I’m much less concerned and will be adding some more soon.

119. Jerome – do you look at the regular charts? Wondering if that break of the 200 day sma alarms you in context of your other comments re HK.

120. BSJ, thanks for the info, I have been out of the office, will do some dd and look into it.

121. 106: I thinkthey are like NOG ; small staff, hire everything out.

122. #117 – or if it gets extra cold pronto and everyone remembers that we do take gas out of storage every year.

123. Anyone know who else is in Alberta Bakken besides ROSE and NFX?

124. RE: #119, yes I look at both, I combine candle stick analysis, P&F charts and fundamentals…. I give a great deal of deference to the 200 SMA, it’s watched by a lot of people, but taking into account all the technical aspects unique to HK’s trading personality, the long term P&F support, etc, I think the $21 level is the make or break point here, for example, see the similar break below the 200 SMA back on July 7…only to rally back and complete a “morning star” reversal pattern….

125. RMD – except that NOG participates in lots of wells with small interests. Guess that is the plan here, will go read some more.

     HK call about to start.

126. Thanks J.

127. HK – some of the monetizations may be soon. Terryville field and Hawkville Svcs. in the Haynesville … process of selling them has begun.

     Says they don’t need to sell properties to make their capex (but that’s how I’ve seen it cast by analsyts). They have the liquidity and CF to do it without the deals.

128. HK Notes

     Haynesville:
     Well costs still coming down, saying 8 to 9 mm in presentation, says last few wells about $8.25, may go under $8 in 2010 as drilling days falls.

     > 18 MM/d IP for their 64 wells drilled to date.

     1 month average rate: 14.5 MMcfepd

129. Apparently no barn burner info for HK to stabilize the fall.

130. HK Notes

     Eagle Ford Shale:

     Drilled 30 to 35 wells now, all commercial,

     New acreage is more condensate rich, adds about 1 Bcfe of reserve to what you find in the dry gas wells.

     Red Hawk – shallow, EFS, oil, 200,000 barrels target for about $2.5 mm per well.

131. Ram – they aren’t paying attention just yet.

132. Z: If HK can get pummeled why wouldn’t CHK show further weakness? Small ’10 hedges and more streached balance sheet.

133. Tom – No reason to think it wouldn’t have fallen more than HK, which is why I’m a bit perplexed here.

134. Interesting that CHK is currently technically weaker than HK (HK still holding it’s buy signal)…CHK went on a P&F sell signal with the print thru $25, now finding resistance at the 20 day SMA, which recently traded a bearish crossover with the 50 day SMA, this is watched by a lot of technical traders..CHK finds supportat the 200 SMA at around $22…

135. HK call over.

     Main points:
     Other than in the Haynesville, there is little lease expiration pressure to drill. Not in the Bossier, not in the Eagle Ford.

     Had mentioned before that at current rate of drilling they will get most of what they want in terms of acreage in the Haynesville into HBP status by mid 2011.

     Mentioned that they are hedged well to weather weak gas prices for next year.

     Mentioned that if gas prices are still weak mid year 2010 they will scale back without much trouble.

     Sounded pretty confident on valuations for midstream asset sale…saw Tudor crying fowl on that the other day, saying it was not worth that much, sounds like they need to sit down and have a chat about it.

     On the oil play, $2.5 mm for 200,000 barrels is the plan. Those are good finding costs. Since first well not yet drilled its obviously early to discuss EUR targets like that so its interesting that he was willing to divulge their model.

136. 107/109

     nm and others have their ships locked in from 1 to 10 years therefore there is nothing available to capitalize on the higher rates

     i vaguely remember that picture of ships laid up but all ships are not created alike

     Tankers are weak and so are container vessals. The bdi is dry bulk ships that carry ore and coal and grain not tvs or cars which are carried on containers

137. http://www.tradewinds.no/drycargo/article548265.ece

138. Thanks Bill, been doing a little digging, not biting yet.

139. http://files.irwebpage.com/reports/shipping/08l26Pvi9u/Imarex%20Daily%20Report%2011.18.09.pdf

140. it could well be a head fake

141. in 139 – the drybulk comment about distressed sales and lower rates is interesting.

142. Bill – did you listen to HK? I think Stoneburner should be doing these. Floyd sounds like he doesn’t want to be there and said in the Q&A that he’d appreciate it, jokingly, if no one asked him a question. I understand the frustration with the Street but the attitude is off of what I expect from my CEO. Suck it up and put your best foot forward.

143. BOP – any idea how they measured the slowness of the day as you reported last night? This day has got to rival yesterday on that basis.

144. Bad news = I’m long MCF.
     Good news = it is approaching 42-area that was the avg. price the co. paid to buy back stock.

145. z — #143, no. Was guessing it was a volume vs time thing. But DK for sure.

146. 144

     Im in mcf too and longer term they will do fine. The avg realized margin per mcf in q3 was about 4.00 an mcf with 0 hedges and a lousy pricing enviroment

     At the current price, buying back shares is buying producing reserves at 2 dollar an mcf and since they can sell each 1 of those mcfs at 4 or better they are making a 100 % return on that purchase

147. i concur with your comments on 142

     regarding 141

     Nm has been buying those distressed assets

     capes in the low 60’s, most ceo’s thought it will continue into 2010 with lack of credit and low rates, but if rates stay higher so should the returns and prices will firm up

148. Credit Suisse out saying it is increasingly hard to make a case for falling lower 48 production.

     Z: how did you get to $4.50 on AEZ? Co. on the road I just found out in the next week or 2.

149. >Credit Suisse out saying it is increasingly hard to make a case for falling lower 48 production

     that is the question…

     the market and futures prices say no

     each company i follow say they will have higher 2010 ng production

     so how the heck does the number fall, when every pubic company projects higher growth?

150. Natural gas production in 3Q2009 by the top domestic explorers showed little sign of pulling back, and aggregate output by the end of the year likely will be 9% higher than in 2008, SAID TPH

151. >The Department of Interior’s Minerals Management Service (MMS) Tuesday held its first meeting with officials from Rhode Island to discuss renewable energy development on the Outer Continental Shelf (OCS). MMS is in the process of establishing task forces to consult with states concerning renewable energy leasing and development on the OCS
     ————————————–
     My comment:

     Talks will continue througout the summer with meetings to be held in Newport

152. Re 151 Bill

     With cocktails and dinner nightly at Castle Hill :-))

153. When comes to stocks, I don’t use charts. As a value investor, if I like a company I like it when the stock is going down. However, if I did follow charts, man, there are some ugly gasser charts out there. I don’t see one gasser chart that is doesn’t look terrible.

154. RMD – re 148. I’ll have that in the post a couple of different ways tomorrow.

155. From Bedtime Market Strategist —

     Chasing Leprechauns?
     There is little doubt that Gold is the asset du jour. Gold futures were up 45 basis points today, but with all of the excitement, one would think they were up $45. We have been fans of the reflation theme for over a year now. Throughout the first half of 2009, we advocated owning assets across the board for this very reason. During the summer, we walked away from commodities for several reasons, such as expected regulation, a weak fundamental picture, and the threat of deflation should the recovery falter. Crude is not much higher now than it was in May. Ironically, we see avoiding commodities as protection against the deflationary threats that are the major risk to recovery and which would be the likely cause of any potential double dip. Companies have resized and positioned themselves for leaner environments. They would not be immune from the negative impact of a double dip but they are better prepared than a year ago. Commodities do not provide protection from a deflationary environment.

     Glittery Debate
     We are still in the recovery camp so the current rise in Commodity prices does not alarm us. We believe that in recovery, most asset prices will rise. That being said, while we are not “gold bears” we take issue with some of the bullish arguments that many are predicating this move is based upon and we view them as a warning signs. The first argument is that smart guys own gold. That is very true, but most of them own it much lower and bought it late last year and early this year. The next argument is that the Dollar keeps going down. This is also correct. The Dollar has been declining most of the year but its rate of descent has slowed in the past few months. Future inflation is a big concern. It is a concern for us as well. Buying Gold at these levels poses the risk of moving beyond a reflationary trade into a straight inflationary bet. If so, such an investor must have a very robust view of the recovery. Despite our optimism, even we are not there. Equities, on the other hand, should still benefit from improvements in the economy yet to come. If we double dip, both asset classes should fall. Another argument has been that Central Banks are buying the metal. Let’s see, are they known for being astute investors?

     The worst, yet most popular, reason of all for buying gold is that on an inflation adjusted basis, it should be $2000 when compared to 1980 levels. It has never traded at the forecasted inflation adjusted price at any time since that argument first started being used. It does not mean that it won’t trade there someday, but one would still be hard pressed to pinpoint why it is more valid today than at any other point in the past 29 years, when it did not work. This is the equivalent of saying that the Nasdaq Composite should be at 5000 because that is where it peaked in 2000. Of course that sounds absurd, because we know equities need to trade at some multiple of earnings and the level of earnings today (or back then) do not warrant it. Gold is not encumbered by such valuation metrics. Remember that gold was pegged for 7 decades prior to the 1970s. It was unpegged in an extremely inflationary environment, which gave investors a way to play inflation and created a bubble. The point is that measuring against the bubble peak of $850 is hardly a conservative move. Furthermore, even if you measure against the average for the year of $615, it was still a bubble year. The average price for the Nasdaq composite for 2000 was 3700.

     As we stated we are not gold bears, but we are recovery bulls (until we are given a reason not to be). Anyone who owns gold and has been there great. Chasing Gold momentum is chasing (and believeing) recovery and the future inflation that it brings. We hope that investors are truly evaluating whether gold is the “win-win” it is being made out to be, protecting you from future inflation while still being immune to the potential deflation that would be the cause for this recovery to fall off track. We don’t see that being the case. In addition lacking a valuation metric makes it easy to jump on board the momentum. More than anything, this is likely another reflection of the negative sentiment towards equities that has proliferated throughout 2009.

156. Gold isn’t a reflation trade, it’s a value preservation trade and gold is certainly not yet the asset du jour. Very few people hold it in meaningful amounts and even less people hold the physical commodity.

     Commodities do protect you in an deflationary environment, see the past year for details. It protects you against the devaluation of your dollars when all the Keynes morons come out of the woodwork to helicopter drop money all over the place with 0% rates.

     Gold has a relative valuation metric, the competitive devaluation of increasingly meaningless currencies. The valuation metric of gold is no different than the valuation metric of a USD, Euro, Yen, Cando, franc, etc…

     Overall, very bad arguments. I could say lots more but really I don’t care if nobody else protects themselves or diversifies from USDs.

     I’m not saying to invest now because I told everyone to invest 300 dollars lower and I was in lower than that but gold is an insurance policy that is underowned and will be frantically pursued at some point.

157. Also, when gold drops significantly for the first time there will be a massive consolidation before takeoff.

158. Also in 156 I meant to say gold does protect you, not so much commodities in general.

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