Wednesday Morning – Oil Preview Plus

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Market Sentiment Watch:  Market is watching every tick of the dollar. I for one am watching the Transports which made fresh highs last week and were off only a hair yesterday. 

  • Eco Data Watch: We get Wholesale Inventories at 10 am EST, other than that still a calm day for data other than the oil numbers.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $6,300
    • 15% Cash


  • Yesterday's Trades:
    • WLL – Added a $60 December call (WLLLL) for $4.80 with the stock off 75 cents with a weak group. See site for details of last nights pr there.

Commodity Watch:

Crude oil fell for its fifth straight day, ending down $1.31 to close at $72.62 yesterday. Part of the drop was due to fine tuning of EIA's 2010 global oil demand forecast (up last 2 months, down a bit as of today); all told EIA sees global demand now sees demand up 1.1 mm bopd (last estimate was up 1.26 mm bopd) to 85.22 mm bopd. After the close, the API released another set of data, bullish this time but which make little sense... crude inched higher on the release but the idea that crude stocks drop on a big build is counter-intuitive to all so most traders will continue to focus on the EIA data on Wednesday, sorry API.  This morning crude is trading up a buck as the dollar retreats.

Natural gas rose another $0.14 (3%) to close the day at $5.11. The chart of the front month now looks like this. This morning gas is trading nearly a dime on the blizzard, and stronger crude and equity futures. Colder than normal weather is expected to group nearly all of the U.S. for the next 10 days with a warming trend in the west entering at the end of the 15 day forecast.

  • Early Read On Natural Gas Storage: Street consensus: 48 Bcf withdrawal. My number thought is closer to 60 Bcf.

    • Last Week: 2 Bcf Injection
    • Last Year: 66 Bcf Withdrawal
    • 5 Year Average: 131 Bcf injection
    • 10 year Hi: 27 Bcf injection
    • 10 year Low: 202 Bcf withdrawal


Oil Inventory Preview

API Watch: Another weird set of numbers.

  • Crude: DOWN 5.815 mm barrels
  • Gasoline: DOWN 0.753 mm barrels
  • Distillates: Up 1.011 mm barrels

ZComment: The market want to see two things right now to support crude from the U.S.: 1) Distillate Demand Increasing. So far, no joy there as we have not yet seen even a seasonal increase in distillate fuel oil demand and 2) Gasoline Demand Increasing on a year over year basis. That one's more apparent but still tenuous given high unemployment levels. By the way, normally this time of year, refiners are producing as much distillate as possible resulting in a builds in inventories there so if API is correct, it would not be out of the ordinary.


Stuff We Care About Today

ROSE 2010 Budget and Initial Guidance:

Budget: $280 mm

  • 80% for drilling

    • Includes funding of a 3 rig program in the Eagle Ford Shale and
    • Sounds like a 1 rig program beginning in the 2nd quarter in the Alberta Bakken, after they complete their third well. Their first well is testing now so we should see results there any day.
  • 20% for leasing and seismic

    • EFS acreage up again, now 52K net acres, from 42K net acres at the end of the third quarter
    • Bakken acreage also ticked up, was 230K net acres, now 240K net acres in Montana

Production Growth for 2010: 145 to 155 MMcfepd target puts them on a path towards 11% growth, preferable to this year's down 8% target.

EXXI Secondary Notes:

  • Raises $259 mm (net) via stock (at $1.90 per share) and 7.25% convertible offerings.

Housekeeping Watch:

  • The (WLL) piece from yesterday has been archived on the Reports page.
  • The E&P Metric pages have been reorganized by market cap for easier reference. We will add play specific acreage / reserve pages in the near future (Bakken, Haynesville, etc).

Odds & Ends

Analyst Watch:

  • SWN - Barclays raises target from $54 to $58, rating Overweight
  • KOG - Initiated at Outperform

Interesting Reading Watch:


148 Responses to “Wednesday Morning – Oil Preview Plus”

  1. 1
    PackMan Says:

    EXXI: http://finance.yahoo.com/news/Energy-XXI-Prices-271-Million-pz-178642989.html?x=0&.v=1

    XOM / Nat Gas: http://www.businessinsider.com/exxon-mobil-natural-gas-preso-2009-12

  2. 2
    BirdsofpreyRcool Says:

    EXXI — Thank you, PackMan. Hearing both the stock and the perpet convert pref’d were “wildly oversubscribed.” That perpet convert pref’d is — frankly — a GREAT deal for investors. As a straight equity holder, i’m not as happy with it. Gives the mrkt a reason (and a vehicle) to short stock against. But, i-bankers always seem to sell the concept to the company as a way to “broaden your investor base.” Thing is, there are some people you do not want to let into the party… but, CEOs/CFOs never learn.

    How do you know when an i-banker is lying? His mouth is moving…

  3. 3
    zman Says:

    NG and Crude just gave up the morning gains as equity futures pull back.

  4. 4
    zman Says:

    Working on getting the KOG Mokeg piece.

  5. 5
    TEXWS6 Says:

    Funny note from the Climate Change Conference. Seems they have ran out of limos for all the tree huggers and have had to borrow from neighboring countries, I wonder what kind of MPG a limo gets? Also, seems that the local airport isn’t large enough to house all the private planes for the attendees, so the jets are dropping off the attendee, and then flying to an off-site airport to park for the remainder of the conference. Once the conference is over, the jet will come back to pick up the attendees, sounds pretty efficient to me.

  6. 6
    zman Says:

    BOP – on the EXXI – it will be interesting to see what kind of follow on interest there is in the name. Right now it is trading below the offering price, which itself was in the hole. At least they got the amount of aggregate proceeds they were looking for to do their transaction.

    Eli – will you be looking at the convert?

  7. 7
    PackMan Says:

    BOP – LOL – That’s my CEO joke !

  8. 8
    PackMan Says:

    TEX – they should have to travel by mule if you ask me.

  9. 9
    zman Says:

    Tex – Latest news is a plan has already been leaked that gives most of the decision making power to the richer nations which has caused an uproar from the smaller, poorer nations. What a shock that the guys paying the tab are going to make the rules.

  10. 10
    BirdsofpreyRcool Says:

    EXXI — hearing that the stock deal is indeed “oversubscribed.” What doesn’t make sense, is that the stock is trading below the $1.90 2ndary price in pre. Thought is, “it’s the arb” from the perpet convert guys… THAT started yesterday… but could cause some interesting moves in the common at open. If the move is interesting enough, I’ll have my hand out.

  11. 11
    zman Says:

    In fact, here’s the leaked draft:


    Developing countries don’t like the caps this imposes at all, have said in the past they would not sign something like this.

  12. 12
    zman Says:

    BOP – Any word on if they did cancel their presentation at Southcoast today.

  13. 13
    BirdsofpreyRcool Says:

    I didn’t ask… but I think the CEO/CFO were making stock presentations right up to the last minute yesterday. Maybe they were worried their schedule would get too jammed. DK

  14. 14
    zman Says:

    BOP – Gotcha, thanks.

    Seeing some nice rebounds in BEXP but no move from the MOKE initiation on KOG and NOG still lingering lower now (I’ve got Januaries there so not overly concerned and I may take the common here)

    WLL – easing today at the open, down 1% yesterday on great, and I do mean, great news (having a second core area work out for you is always great. If the oil numbers are kind I expect that one to lift. Street strangely quiet there.

    ROSE – another new high but only slightly so … no data in that pr and they did mention rising costs in the Bakken. The way that was worded it sounds like rising costs in their program as they’ve gone from no wells to drilling and completing three wells and still have not released results on the first. That should be a pre end of year event. Holding the common only and up nicely on the position. The options there are just too weird.

  15. 15
    zman Says:

    S&P broke yesterday’s low as the dollar started to recover of its lows this morning.

  16. 16
    Dman Says:

    #10 er …. is China one of the rich nations these days? They’ve got all the money, at any rate. Normally I’d call that close enough to being rich.

  17. 17
    Dman Says:

    BOP – bought a starting nibble of this EXXI at $1.85. So I guess I’ll need to start paying more attention 🙂

  18. 18
    Dman Says:

    Z – street scared of where crude could go in the current little deflation episode. I’d guess that’s why they are shy of WLL.

  19. 19
    pwdrhound Says:

    Re; 16 … Yeah, seems the definition of “developing” nation needs to be revisited for China/India.

  20. 20
    zman Says:

    Dman – here ya on 18…think the Street is just marking time until they see today’s numbers. Either we see a pick up in distillate demand in the near term or people in the northeast have opted to freeze their way through this blizzard.

  21. 21
    zman Says:

    EXXI – not tanking which is positive, starting to lift a bit with the group. May add a little more following the oil numbers.

    Am also likely to add NOG common, swapping out my SD to pay for it.

  22. 22
    BirdsofpreyRcool Says:

    Actually hoped EXXI would tank to $1.75… i’ve got HeadTrader on alert at that level. Not heading my way, tho.

  23. 23
    zman Says:

    West – does the service you subscribe to on the Bakken give you reports in Montana. Looking for anything on the Tribal Gunsight well.

    BOP – I’d rather it not. Yes you can get it cheaper, but that kind of pullback can leave a bad taste in buyer’s mouths for a long time, tying the moniker “busted deal” to their ticker.

  24. 24
    VTZ Says:

    WLL makes no sense.

  25. 25
    zman Says:

    V – am thinking the same thing. Goes for SWN as well.

  26. 26
    zman Says:

    V – note on the daily charts the volumes on these pullbacks are generally lower than on the rallies. Volumes very light today in front of the oil numbers. This seems to be people coming out of the name who bought in for the L&C news, which came on a bad market day and has not, from what I see, garnered a lot of analyst upgrades (saw 1 yesterday). Rest of Bakken group up, figure bullish oil gets it up, bearish oil doubles the loss on the day.

  27. 27
    BirdsofpreyRcool Says:

    EXXI — It’s only a “busted deal” if it goes there and stays there. I firmly believe that will not be the case. The only reason the stock is at this level is b/c of those pesky converts. Period.

  28. 28
    1520sbroad Says:

    I have been watching the Bullish Percent charts that the group here mentioned a week or so ago – take a look at the Bullish Percent chart for energy if you get a chance – it is in the mid to high 40% range now. In my mind that indicates we may be due for a turn here shortly. I think the Stockcharts.com symbol was $BPENER.

    Re #24 and 25 – GMXR has actually done a lot better this week than SWN. Makes little to no sense.

  29. 29
    VTZ Says:

    Of note, the dollar tried to crack the 76.30 range a couple times and has rallied up and been pushed back 3 times and one lower high around 76.20 so this dollar strength is still looking like it could reverse. That being said the trendline was still breached.

  30. 30
    zman Says:

    BOP – my point is that weak hands could begin flushing it so it might not stop were it to touch lower levels like $1.75. I have no doubt the covert shorts are pressuring it. But it is less than half institutionally held. We’re near the end of the year. Tax loss selling could ensue. So again, I’d rather it not back off as some of the retail accounts may suspect they missed something, that the deal isn’t so good, what have you, and sell. As you know, their decision matrix is more often than not based on price, not fundamentals.

  31. 31
    zman Says:

    AEZ = Wow. Better to hold acreage and not drill it, lol.

  32. 32
    West Says:

    #23 I haven’t seen anything on the gunsight well.

  33. 33
    zman Says:

    EIA Oil Inventory Report:

    Crude just before the report: up 50 cents at $73.10.

    Crude DOWN 3.8 mm barrels
    Gasoline UP 2.2 mm barrels
    Distillate UP 1.6 mm barrels

    Gasoline at 9.012 mm bpd, up slightly from last week.
    Distillate: 3.32 dismal, weak, pathetic.

    Not great numbers. The crude was down due to imports.

  34. 34
    zman Says:

    Not terrible either, just so-so. Given the drop crude has already had I would not expect a further big sell off here.

    Utilization was up and total product supplied week to week was flat. Also, resid consumption was up strong again. Could be some blending going on for heating oil there. So maybe less distillate being used in some applications (the lighter diesel) vs the crud at the bottom of the barrel. Hmmm.

  35. 35
    West Says:

    # 23.I don’t have a service, is one available?

  36. 36
    zman Says:

    Primer on types of distillate who are wondering what I’m talking about in 34.


  37. 37
    zman Says:

    West – I thought you pulled those long well notes from one?

  38. 38
    BirdsofpreyRcool Says:

    z #30 — i don’t disagree with you on your description of what makes for a busted deal. It’s just that I’ve seen some screwy things happen at first, when a derivative security is involved. But it’s where a stock settles at the end of the day that seems to dictate the retail mind. I think EXXI closes above the $1.90 2ndary price today… unless the mrkt and/or oil prices fall off a cliff.

    Also, not sure you will see a lot of tax-loss selling in this name… it started the year around 75 cents. But screwy stuff happens in the last two weeks of the year too… with light volume and tax positioning. Which is why I like to keep some dry powder available, if possible, to pick up $20 bills on the sidewalk, should they appear.

  39. 39
    zman Says:

    More EIA stuff and then I’ll shut up about it.

    Crude imports at 8.1 mm bopd. This is low, very low, even for this time of year, easily a record.

    This tells us a few things.
    1) Demand signaled by the U.S. refiners is low. This should be a shock to no one.

    2) More of the U.S.’s demand is being carried by rising U.S. oil production.

    3) With OPEC producing more, almost on a weekly basis, the extra barrels are being sopped up by non-U.S. demand growth. That would be the middle east itself, China and India.

    From a macro oil perspective, this last thing is a very good thing for oil bulls.

  40. 40
    zman Says:

    BOP – agree re end of day price and was not saying which way I thought it would go. But should it weaken, it could really weaken.

    Crude back to up 40 cents.

  41. 41
    choices Says:

    FWIW: Not sure what to make of this chart but Shanghai does seem to hanging in, not blasting up but not falling off a cliff either (as some were predicting a few months ago)-seems to be steady growth, at least thus far.


  42. 42
    zman Says:

    Wow, green screen, couple of laggards but they are lifting now as well. Seems the market likes the oil numbers, crude up 85 cents now, a bit self perpetuating as the crude traders watch the S&P and the S&P has oil in it.

    LINE moving to a new high. I will have an MLP update in tomorrow’s post. So far, I see no reason to migrate from LINE to another yield horse.

  43. 43
    Jerome Blank Says:

    WLL bounced right off the daily 20 day SMA…dialing down to the 30 min, there is a nice “hammer” forming right at the 200 period SMA… as of now support is holding nicely….daily chart still showing higher highs and higher lows…would like to see WLL get back above $65

  44. 44
    zman Says:

    Back in a few minutes, about to listen to a pitch on a cash for caukers hvac unit upgrade. Law not even passed yet.

  45. 45
    West Says:

    #37. Z , I had worked up a KOG report the nite before for our group, just didn’t want klog the blog with all those stats.

  46. 46
    elijahwc Says:

    #6 EXXI Converts cusip 29274U200: I will look at them after they season. Made a call: they were bid low this am at par and 3/8ths bid and currently bid as high as 101.25 without any offers. Converts don’t work for me on a new issue basis because of all the arb crosscurrents but given the fact that they are b flat perps I will be there if they bust.

  47. 47
    VTZ Says:

    Oil back up, dollar back down. Gold at HOD. Dollar looking to potentially retest the trendline which was broken and potentially fall back into the range?

  48. 48
    zman Says:

    West – thanks. I gathered you grabbed the stats off a website.

    Eli – thanks, just curious. We should send RMD to meet with them first anyway.

  49. 49
    Jerome Blank Says:

    RE: #28 $bpener, hi 1520, keep in mind that the energy bullish percent has been at or below 20% on many past occasions, I find the bullish percents to be most helpful at extremes…also notice that trendline support is right around 24%, based on history the bp still has some room to move to the downside…

  50. 50
    zman Says:

    V – 47 would be my preference, yes, lol.

    JB – thanks, you and me both. Watching the WLT come back up after a similar bout of profit taking.

  51. 51
    zman Says:

    NG down 6 cents on the lack of distillate demand. This often happens and I’d tell you the two have little to do with each other, given that gas is a spot demand (it’s cold, people use gas) vs heating oil (which is lumpier, it’s cold, people may or may not have oil in their home tanks). Also, gas use is much more geographically diverse than HO use.

  52. 52
    kyleandy Says:

    bop – would u explain to me the how and why of the arbitrage trade involving converts. u can use the EXXI’s as an example. thks

  53. 53
    1520sbroad Says:

    #49 – Jerome – thanks – i should have included that i start to get interested at around 30.

    I used to read a lot of Dorsey Wright stuff. I always thought the bullish percent thought was one of his better ones.

  54. 54
    VTZ Says:

    Does anyone have any comments on the reverse repos that the Fed seems to think are brilliant?

  55. 55
    BirdsofpreyRcool Says:

    kyleandy — #52 eli can give you the exact technical answer (the number of shares to short). But here is the big picture. Any convertible security can be thought of as comprised of several parts. One part fixed security + one part derivative security (in this case, a call option on 43.86 shares of stock, strike price = $2.28). In this case, the EXXI convert can be broken down into it’s component parts, one part 7.25%perpetual, convertible preferred + 48.86 shares of common stock. An income fund will buy the convert and short 49 or so shares against it, locking in the 7.25% yield and protecting their downside, if the stock tanks.

    Income funds are different animals, they are perfectly happy to give up the upside (from the stock appreciation), clip the coupons, and know that they have protected themselves from down side risk.

    So… with $100mm of EXXI converts out there, that means that 43.86mm shares of common could be shorted against it.

  56. 56
    Jerome Blank Says:

    Gold is holding within the initial P&F sell signal range…gold went on a sell signal with the print thru 1130 yesterday, gold perfects a three box reversal “bear trap” on a print of 1160…silver is holding up a bit better from a technical perspective, of the two silver is the relative strength leader

  57. 57
    zman Says:

    BOP – well said in 55.

  58. 58
    BirdsofpreyRcool Says:

    typo ==> 48.86 should be 43.86… and “one part perpetual preferred + 43.86 shares of common stock.” (strike the “convertible” part… it’s redundant when the security is broken down into it’s component parts).

  59. 59
    VTZ Says:

    I nibbled and added 1/6th of my gold position this morning fwiw.

  60. 60
    zman Says:

    Crude back to even on the day. Stocks just drifting with the market. Jobless claims tomorrow and retail sales on Friday in view. Volumes very light bringing to mind all the comments of late about people checking out early this year, doing little between now and new years from a risk standpoint.

  61. 61
    zman Says:

    S&P takes SD to B+

    They announced $400 mm in seniors last night to help fund the purchase from FST. I’m going to sell this name this week.

  62. 62
    kyleandy Says:

    bop – thks -the income fund willing to take a loss is the part i didn’t understand – so who would the buyers be?? there is tremendous volume and some 1mm share ticks. also is most of the shorting done immediately u think?/

  63. 63
    BirdsofpreyRcool Says:

    kyleandy — the shorting is done immediately, yes. The key (if you’re an income fund) is to protect the downside as fast as possible as those funds do not want to take stock market risk.

    As long as EXXI delivers on their expected cash flow, these converts will stay tucked away, with holders happily clipping coupons. But, if there is any change in the outlook for EXXI, then you will see these converts back on the market. And then, let the hedge fund games begin! (again, eli is the expert here… any thoughts, other than waiting until it’s “busted”? lol)

  64. 64
    BirdsofpreyRcool Says:

    Just to sum up…

    EXXI convertible preferred =
    LONG 1 perpetual preferred stock, paying 7.25%
    LONG 43.86 call options to buy EXXI stock at $2.28, maturity date 12/49

    To hedge the stock mrkt risk, someone holding this piece of paper would SHORT 43.86 shares of stock (more or less) against that position. So you end up being LONG a 7.25% preferred, LONG 43.86 calls at $2.28, and SHORT 43.86 shares at $1.88. The long and short position on the call+stock, cancels out the stock market risk… leaving the fund with a 7.25% piece of “straight preferred.”

  65. 65
    BirdsofpreyRcool Says:

    Also, you would take the proceeds from the short sale of the EXXI stock and invest those into some other income-producing vehicle.

    It’s great fun, to be a convertible fund mngr. All sorts of knobs you can turn and play with!

  66. 66
    zman Says:

    Crude broke $72, eying $70. Distillate leading it lower.

  67. 67
    zman Says:

    Johnson Rice reiterating their Focus List rating on ROSE, calling 2010, a transformative year for the company. I don’t disagree. Story has gotten a lot more interesting over the last 6 months. They must like the 1st Alberta Bakken well a lot since they are now drilling #3.

    NG breaking $5 on the dollar drop in oil. This will be oil’s 6th negative close in a row, one of the longest down streaks in a year. Seems overdone at this point but it needs to go ahead and test support in between $70 and $71 now.

  68. 68
    PackMan Says:

    Sold some SWN $39 puts for 45 cents. Would like to own some at 38.55 on next Friday, or keep the change.

  69. 69
    zman Says:

    Hear ya Pack, sitting on hands for now. Oil testing that $70 to $71 range now. Seems overdone/due for a bounce. OPEC will step up the pre meeting chatter soon.

  70. 70
    zman Says:

    Crude hit $70.53 and bounced back over $71. Hopefully that’s the low for the near term which would mark a higher low, similar to the end of September.

  71. 71
    zman Says:

    TARP extended to Oct 2010:


  72. 72
    zman Says:

    Crude down 2.20, spoke too soon, they want a $70 test.

  73. 73
    PackMan Says:

    BOP – I don’t see any calls for EXXI.

  74. 74
    BirdsofpreyRcool Says:

    PackMan — that is why a convertible security is called a “derivative” security. It has a “call option” (which is a derivative) imbedded as part of the structure. If there were EXXI options traded and straight EXXI preferreds traded, you could replicate the convertible preferred that they issued today.

    Just as you could “construct” a synthetic convertible preferred (by buying the preferred and a long-dated call option), you can “deconstruct” a convertible preferred by valuing the theoretical components that go into it. The problem here is that there is no straight preferred and no long-dated call options on EXXI. So you can’t value-test your deconstructed model against market prices. However, one can come up with theoretical “prices” for both a straight preferred and a long-dated call option. As a matter of fact, that is one of the ways that a convertible investor will look at a convert… by valuing the individual components separately and then just adding them up.

    Corporate Finance 402.

  75. 75
    md Says:

    Re: #51
    <15PPM-500 PPM Inventory UP 2300
    500PPM distillate inventory DN 750
    Likley that HO demand is UP while rest of distillate is DN.

  76. 76
    Jerome Blank Says:

    Dollar testing the high again now for a second time at 76.64, if gold prints thru 1120, the bear trap is off the table…

  77. 77
    zman Says:

    md – yeah saw that, which does make sense but it means that farming and over the road diesel demand is worsening. Farming had a late end to the season but should be off now, that I get. The trucks part doesn’t match up with recent anecdotal evidence.

  78. 78
    zman Says:

    Coal names surprisingly strong today.

    NG trying for a close over $5 despite crude, which may for its own part try fro a close over $71. Crude “feels to me” as overdone this week as NG did late last week.

  79. 79
    zman Says:

    ROSE has a CC with clients of Johnson Rice tomorrow morning.

  80. 80
    zman Says:

    Jerome – SWN thoughts, about to crack $40?

  81. 81
    Jerome Blank Says:

    Re: #80, SWN breaks below its supportive P&F trendline with a print of $40…

  82. 82
    zman Says:

    Thanks, there it went.

  83. 83
    RMD Says:

    EVEP’s website has presentations at Wells Fargo conf. and the replays. WLL and HK starting now. (go to IR, then Presentations& Events.)

  84. 84
    zman Says:

    RMD thanks.


  85. 85
    RMD Says:

    I’m musing that WLL had already discounted the L&C well results, so this is “sell the news”.
    It’s probably time to buy CHK as I sold the remaining little bit as I looked at the slides and listened to the nothing-new presentation.

  86. 86
    zman Says:

    RMD – hear ya on WLL, apparently so it’s “sell the news” in the near term however, given the low valuation there, (under 4.5x CF) and given that they were actually somewhat short on acreage in the Bakken, a second front is a bigger deal than the prior rally would indicate. I think it retakes the recent high in short order … as long as crude doesn’t absolutely fall out of bed. I own a little $65 strike position and the common.

  87. 87
    RMD Says:

    HK presentation: “people say there is an overhang (of equity); that’s bull shit.”
    Think he heard the St.’s comments?

  88. 88
    Jerome Blank Says:

    Re: #82…SWN is now on a P&F sell signal and has just broken P&F trendline support…the burden is now on the SWN bulls to hold the stock above its 200 day SMA which is right below us here at about $39.25…if that gives, there’s not much below us to cushion the fall until about $34…

  89. 89
    zman Says:

    SD into the $7s, ugly. Will wait to see what the NG number looks like tomorrow.

    RMD – he’s told the Street too many times he won’t do more equity but then found something he had to have. Long term I think it works out but he’s obviously being “CHK’d”.

  90. 90
    zman Says:

    WLL – presentation so far the same, should be coming to Lewis and Clark now.

  91. 91
    VTZ Says:

    Jerome, where did you see the USDX at 76.60. I don’t see anything higher than 76.31 except for after hours yesterday where it spiked through then came back down?

  92. 92
    zman Says:

    WLL on Lewis & Clark area

    Just a boring, mundane presentation on the new area, he hit the highlights of the pr, nothing more. Actually handed the pr to the crowd from Dec. 7th. Management should assume people have already read that. They apparently did not update their presentation for the new pr, sloppy, unlike them.

  93. 93
    PackMan Says:

    74 – BOP – thx. Missed Corp Fin 402.

  94. 94
    Jerome Blank Says:

    Hi VTZ, I was watching US dollar index futures, DXH0, “thinkorswim” platform is showing the front month to be the March contract…high 76.66, what chart are you watching?

  95. 95
    BirdsofpreyRcool Says:

    PackMan — I just meant, I wanted to give you as complete an answer as I could, but I didn’t mean to get all “academic” about it.

    So, you have now graduated from CorpFin 402!

  96. 96
    zman Says:

    WLL – thinking 640 acre spacing at Lewis and Clark area so about 165 wells on their acreage were it all to work.

    If we go with a net revenue interest of 80% and 500,000 BOE reserves each, that would give us potential reserves of 66 MMBOE for L&C. This relates to 2008 YE reserves of 239 MM BOE. So not small potatoes even if you risk that number by 50%.

  97. 97
    zman Says:

    Jerome – here I go beating a dead horse. If SWN closes above $40 is it on a PF sell in your book?

  98. 98
    PackMan Says:

    95- BOP – It was a good answer; no issues !

  99. 99
    VTZ Says:

    RE 94 just quoted as USDX (not futures) on my RBC brokerage.

  100. 100
    zman Says:

    V – I show a high today of 76.33 on the dollar index.

  101. 101
    VTZ Says:

    Yeah me too… which was the former support and now slightly under at 76.12. It also turned at 76.31 yesterday and right around 76.30 today.

  102. 102
    Jerome Blank Says:

    Re: #97, SWN actually went on a P&F sell signal back on 11/12/09 with its print thru $43, it then held support at its P&F trendline at $41 reversing back into x’s with the rally back to $45 on 11/25/09, but it could not manage to go any higher, never going back on a buy signal, it lost steam from there going back again into o’s giving up trendline support today at $40, the last line of defense would be the 200 SMA at about $39.25, from here we actually need a print of $46 to go back on a P&F buy signal…

  103. 103
    zman Says:

    HAL leading oil service slightly higher. Guess is traders thing they know something about the gas number tomorrow, that and they will be thinking that withdrawals will be massive next week as well. And its been off so its bouncing.

  104. 104
    Jerome Blank Says:

    Re: #99, that explains matters, I’m looking at futures, I’ll go over to the cash index, anyone know the ticker on thinkorswim?

  105. 105
    zman Says:

    Nymex close stunk, natural gas got slapped down below $5 to, off heavily in last minutes to close around 4.90. Oil will be down $2 at 70.66. If we get a dollar rally in the morning that could easily open in the $60s.

  106. 106
    VTZ Says:

    re 104 – It’s different on all brokerages for some reason… might be dx or usdx or I’ve seen ndx as well.

  107. 107
    zman Says:

    re 106 and mine use DX/Y

  108. 108
    VTZ Says:

    Yeah I think lots of the internet sites use ^DXY or DXY as well.

  109. 109
    zman Says:

    SEA sinking back as charter rates fall back off.


    Could be an opportunity to re enter the bulk group emerging as the coal guys all insist demand for steel coal is back to pre 2008 levels.

    KOL jumping turning back up on a weak day and WLT and other coals moving strongly today.

  110. 110
    Jerome Blank Says:

    RE: #107,#108..that’s it, thinkorswim uses $DXY…thanks

  111. 111
    choices Says:

    Gold Feb futures seems to have held @1120, now bouncing up to 1129.5

  112. 112
    zman Says:

    Quite the little rally off the bottom going on.

  113. 113
    md Says:

    If withdrawals are 60 or better do you see gassy opportunity. I’d like to buy $21 HK options on this hypothesis. Any others.

  114. 114
    tomdavis12 Says:

    Z: XLE worst performing sector for November. Yes Yes I know Z has kept us away from some of the worst part of XLE – refiners and large int’l. It is just that Materials and Energy were the worst two sectors in the decade of the nineties. For the decade that will soon end they are the two top performing sectors. It is easy to always expect outperformance from the E&P sector.

  115. 115
    zman Says:

    md – Street’s at 48. If you got 60 Bcf then yes, I think gas would be back up over $5 in a heart beat.

    Last year saw a 66 Bcf withdrawal on pretty similar weather. Demand is a little lower now but hard/impossible to quantify by how much. Supply is lower by about a B a day from imports (so that’s 7 right there, then you have the delta in production, that’s probably another 1 to 1.5 Bcfgpd lower than last December’s level. I’m looking for 55 Bcf but will fine tune that some more today.

  116. 116
    md Says:

    Res. demand has likley not changed. People need heat.
    Comm. slighly down
    Elect. is likely same or higher

  117. 117
    zman Says:

    …and industrial should be ticking up as well

  118. 118
    md Says:

    I’d think 3 BCF lower on inputs unless production ramped up since Oct.

  119. 119
    BirdsofpreyRcool Says:

    Disneyland is cutting back on ticket discounts… they say the economy is bouncing back.

  120. 120
    zman Says:

    In the winter, industrial demand adds a big component of space heating. Railchem shows shipments up since then as well, which means higher throughput out of chemical facilities, which are the #1 industrial users of natural gas. Don’t know if U.S. steel production is up much or not from the lows.

  121. 121
    skimo Says:

    re 64
    does this mean an income fundee would make 43%+/- on his net investment? say 1000 principal less 833 short proceeds for $167 net invest and $72.5 annual income?

  122. 122
    BirdsofpreyRcool Says:

    KOG well #9…. hearing 19 frac stages… and it’s 20 below at the site. Kinda explains “what’s taking so long.”

  123. 123
    zman Says:

    BOP – did that come from Cramer?

    Re 122. Yeah, gets expensive with the cold too, very slow going.

  124. 124
    VTZ Says:

    I would call today a win for gold. Dollar and gold bounced off the levels Nicky and I were looking to yesterday (1120 and 76.30ish).

  125. 125
    BirdsofpreyRcool Says:

    skimo… Sounds about right. That is why that convert game is a fav of hedge funds.

  126. 126
    BirdsofpreyRcool Says:

    #123 — ha! don’t know… saw it scroll past headline on BB.

  127. 127
    BirdsofpreyRcool Says:

    DIS comments came from CEO presentation.

  128. 128
    zman Says:


  129. 129
    BirdsofpreyRcool Says:

    Disney to Curb Theme Park Discounts as Economy Grows, CEO Says
    2009-12-09 20:47:46.827 GMT

    By Andy Fixmer
    Dec. 9 (Bloomberg) — Walt Disney Co. expects to offer fewer discounts at U.S. theme parks in 2010 as the economy improves, according to Chief Executive Officer Robert Iger.
    The world’s biggest theme-park operator has already reduced discounts from a year ago, Iger said today at a UBS AG investor conference in New York. Disney added promotions in November 2008 to attract visitors during the credit crunch.
    “We will be able to continue to dial that back over the latter part of 2010,” Iger said, referring to discounts on hotel rooms, food and merchandise. “We are not making these commitments yet until we see the marketplace conditions.”
    After previous recessions, Disney has scaled back the promotions, Iger said. Since last year, the company has offered free hotel nights and discounts on food and merchandise. The parks unit has reported four straight quarters of lower revenue and profit compared with year-ago periods.
    Last month, Disney announced that Chief Financial Officer Tom Staggs and Jay Rasulo, head of the company’s parks, will swap positions in a move designed to bolster the experience of both executives. The switch takes effect at year end.
    Disney, based in Burbank, California, rose 2 cents to $30.70 at 3:47 p.m. in New York Stock Exchange composite trading. Before today the shares gained 35 percent this year.

  130. 130
    reefguy Says:

    EXXI/MMR/PXP- Davy Jones Update: same place as last report before thanksgiving:
    below 28000′ and still cannot get electric logs. Spending $350k/day

  131. 131
    kyleandy Says:

    skimo – re #110 – i think the proceeds are only about $100 instead of $833. 43 shares x 2.40. let me know if i’m wrong

  132. 132
    md Says:

    Keep in mind that ind prod. had a major decline LY. So it s/b same or a bit higher. The 48 number seems low from Prod.

  133. 133
    PackMan Says:

    DIS – sounds like a hope / maybe / we’ll see how 2010 goes kind of statement. Otherwise, they would do it now.

    “We will be able to continue to dial that back over the latter part of 2010,” Iger said, referring to discounts on hotel rooms, food and merchandise. “We are not making these commitments yet until we see the marketplace conditions.”

  134. 134
    BirdsofpreyRcool Says:

    kyleandy — help me out here… each convert is $100 face value… and each is convertible into 43.8596 shares at $2.28. So, i think skimo’s math is right… trying to check with a convert arb guy now.

  135. 135
    PackMan Says:

    Gotta cut thru the spin, folks ! :>)

  136. 136
    kyleandy Says:

    meant 43 x 1.88 = about $80 . thinking of KOG instead of EXXI

  137. 137
    BirdsofpreyRcool Says:

    and i’m not sure that the convert arb guys would short the entire 43.86 shares/convert pref’d… it might be less, to take into account the difference between the current mrkt price and the convert price. I was just trying to explain the Big Picture concept… hoping some of the convert experts on the board here would jump in with the deets.

  138. 138
    kyleandy Says:

    BOP i’m using 1000 face value instead of 100. have to continue discuss later. leaving to see the mighty tampa bay lightning thrash edmonton

  139. 139
    BirdsofpreyRcool Says:

    PackMan #133… you’re keeping it real!

  140. 140
    BirdsofpreyRcool Says:

    kyleandy — have fun!

  141. 141
    skimo Says:

    BOP thanks

  142. 142
    VTZ Says:

    RE 138: Edmonton is going to beat your lowly Lightning! Go Oilers!

  143. 143
    zman Says:

    Dollar back under 76, crude back over 71.

    Md – I hear you on your last comment, mindful of that.

  144. 144
    BirdsofpreyRcool Says:

    Bedtime Market Strategist

    No Trend to Befriend

    It was another lackluster session for equities as they remain locked within the 2.75% range, which has persisted for a month now. Despite closing at its highs for the session, the S&P 500 only managed to post a small gain thanks to a late day rally in a handful of high profile leadership stocks that created a rising tide. The Foreign Exchange market exhibited signs of settling down and exerted less influence on asset prices. The real action remained in the commodity markets. Crude, which rallied overnight due to the API inventory data out after the close yesterday, was disappointed today by the builds in Gasoline and Distillate Inventories reported by the DOE. Gold closed flat but only after reversing $30 from its intraday peak. Investors have either already checked out for the year or are awaiting a new catalyst to break out of this range. Over the next two days, another round of economic data will be delivered. Maybe something will motivate action.

    Oil’s Toil

    DOE inventories in Crude and Gasoline are slowly working their way back down in year over comparisons (see chart). Crude inventories are still 5% above where they were this time last year and 10% above where they were two years ago. Gasoline is 7% above levels of both last year and two years ago. One of the problems, as highlighted by today’s action, is in Distillates, where inventories are up 28% over levels both this time last year and 2007. That being said, at 23% of the total Distillates are the smallest component of the combined Crude/Gasoline/Distillates inventories. The combined inventories are up 10% over last year and 12% over this time 2007.

    China has been importing Crude at a record pace this year (see chart). Considering China’s pace and the fact that we will be seeing a second consecutive quarter of positive GDP here in the U.S., these inventories will need to be worked down quickly to keep Crude at these levels. For the past 6 months, the weak Dollar has helped to support the commodity’s price. Now that the Dollar appears to be stabilizing and GDP is printing positively, that Chinese demand becomes even more important. Crude also represents the bit of inflationary pressure that should appear in the headline CPI and PPI data in coming months. Should that third leg of the stool weaken, it will be a welcome development for the economy as a whole, bringing down input prices.

  145. 145
    zman Says:

    HK in Fortune’s 10 Best Stocks for 2010


  146. 146
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  148. 148
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