T.G.I.F.

Posted on by zman

 

Have a Happy Hannukah!

Market Sentiment: Equity and commodity futures got a lift overnight from more strong data out of China and from retails sales data this morning.

U.S. Eco Data Watch:

  • Retail sales were up 1.3% vs a forecast of 0.5%,  ex autos they were up 1.2% vs a forecast 0.4%,
  • Import prices were 1.7%, higher than expected.
  • Consumer sentiment (forecast 69 vs 67.4 last month) - we get this a little later this morning.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - 2010 E&P growth targets so far, KWK.
  5. Odds & Ends

Holdings Watch

  • $10KP II:

    • $7,200
    • 13% Cash
    • The Current Holdings on the Holdings tab is updated.
    • I will update the spreadsheets on the Holdings on Monday. 
  • Yesterday's Trades: (Both in the ZLT)

    • SD – Sold my common at $8.40, down 20%. 
    • EXXI – Added a second tranche for $1.89, first piece was taken at $2.37 before their secondary and convertible offering was priced.

Commodity Watch

Crude oil closed down $0.13 at $70.54 yesterday. It was a wild session with crude breaching the $70 mark multiple times. This morning crude is trading up close to $71.

  • IEA Watch: While EIA trimmed their 2010 demand outlook earlier in the week, the IEA sees demand rising further than it previously forecast for 2010. IEA took 2010 demand up another 130,000 bopd to 86.3 mm bopd. IEA is now projecting a 1.5 mm bopd picking in demand (1.7% growth) relative to 2009 levels.

Natural gas shot up 9% or 40 cents to close at $5.30 yesterday after the EIA reported a much higher than expected withdrawal from storage. Cold in the deep south helped tug the withdrawal lower although warm temperatures in New England reined in the Consuming region's withdrawal. Next week should see a much larger withdrawal, in line with to slightly higher than average levels for this week of the year (See below). The 12 month strip ended up $0.34 at $5.66 on the day, as the gains were not limited to just the winter months. Volumes in the prompt and winter month contracts were higher than average but not exceptional and I don't think the shorts are all that worried just yet and may in fact be ready to reload after a rally through next Thursday's number. I would not expect gas prices to get beyond the $5.50 market without further data. This morning gas is trading off 8 cents.

Natural Gas Storage Review


ZComments: 

  • Gas fell a higher than expected 64 Bcf with cold weather plunging deep into the country's mid section although for this period, the northeast was still warmer than normal.
    • This was just short of last year's 66 Bcf draw...
    • ...But way short of the 5 year average of 131 Bcf. I would note that the 5 year average includes some extremely cold weather in it. The longer term average for the week would be 90 Bcf, going back to 1994 (the beginning of my data set). So it's obvious demand isn't back to where it should on the non-heating related side of industrial consumption nor is lower occupancy rates in commercial and residential real estate helping the demand picture but that should be a surprise to none.
  • This means the prior week's 3,837 Bcf was the peak for the season ... may we not see 3.8+ Tcf of gas in storage again any time soon including 2010's peak. 
  • More importantly, the storage number coming in in line, as it did, with last year's storage number and on similar weather, provides analysts, myself included, an opportunity to recalibrate their/our models with a little real world data. It's like having an analog in a well bore. Anyway, it tells me I'm not that far out of whack on supply / demand at the moment and after the last couple of weeks I was beginning to wonder. 
  • Preliminary read on next week's withdrawal: 140 to 160 Bcf. I'll firm this up once I see imports and the final weather data for this week next Monday. 
  • As to gas prices, all eyes should turn to just how much winter weather we are going to get and how much gas that will suck out of the salt caverns, obviously, any extra (colder) weather will buoy natural gas prices over the $5 mark and further firm up the 12 month strip, especially the winter portion which remains somewhat subdued:

Note that in the above the graph, we start with the current level of storage and deduct the historic actual withdrawals from prior years to see what the slope of storage would look like, except in the case of the 5 year average line, which just shows where gas in storage was over the average last five years. As you can see in the graph, given our high starting point there is only a slim chance that we will reach the five year average late in the season, assuming we experience the biggest withdrawal season on record. This matters more for Spring / Summer pricing than it does for prices at the moment but we should we have a cold winter its is possible that we will not start the next injection season at a near record high level of gas in storage, especially given falling production, as we did this year (See next graph and compare to the graph above).

The rest of the usual graphs ...

Stuff We Care About Today

KWK Gives First View of 2010

  • Budget: $540mm 
    • This pays for 100 new wells, mostly in Texas, and the completion of another 30 drilled but not yet completed wells.
    • 10% goes to leasehold and seismic.
  • Production - growth of about 22% next year is in line with 2009's 23% expected growth.
  • Midstream Sale: Sold gathering assets for $87.1 mm.
  • Nutshel: Pretty solid, lots of wells drilled for the buck. Combined with the asset sale they should not be outspending 2010 cash flow.  The story could get a little more interesting in 2010 with news out of Canada (Horn River).

    • Valuation: 2010 CFPS at $2.75 now should inch closer to just north of $3 in the near term putting them on the cheap side of the group for a 20+% grower, especially one with a high liquids cut.

BP Enters Eagle Ford Shale:

  • According to Upstream BP is set to close a $100 + mm deal to enter the Eagle Ford shale play.

 

Odds & Ends

Analyst Watch:

  •  None

 

122 thoughts on “T.G.I.F.”

  1. Packman – the estimate for ex Autos sales was up 0.4%. So saying the ex Autos AND ex gasoline number is 0.6% isn’t really bearish in my book. Come on man, rips some holes in those retail sales numbers!

  3. Pack – I think I’ve seen one of their pitchbooks in the back of an airplane seat. No wait, that was Skymall. Nope, never hear of them, probably a bucket shop that is not energy specific but “covers” penny stocks.

  6. Gov’t makes almost $1 B on JPM warrants.

    2 thoughts.

    1 – shouldn’t they be making more $$ on these investment / bailouts in financials ?

    2 – profits are nice; but given the amount of money the govt is flushing elsewhere – AIG FNM FRE GM Chrysler Porkulus etc; – it is unfortunately a drop in the bucket.

  7. PackMan — I signed up for Skymark’s “free trial.” That is 2 minutes of my life I will never get back. It’s computer-generated stuff, looks like. Kind of like the old “Matrix” guys, but even weaker. No fundamental info at all… just turn on the computer and data mine the financial spreadsheets, plop in the company description, and voila’… RESEARCH.

  8. 5 – Ha Ha – just making sure folks know that the retail sales # was juiced by gasoline sales – the headlines won’t tell you that.

  11. Re 8 – Hey, good point. Gasoline sales are not exactly falling out of bed, not just prices but volumes as well. I have yet to figure that one out given the high unemployment. People driving around looking for jobs or cheap homes to pick off or the best parking spot at WMT?

    Note to the administration. Want to get us off foreign oil? Encourage telecommuting. Encourage a 4 day work week or both. Of course, a lot of people could be telecommuting all the way to Copenhagen but did they? No way. It’s like Canada’s Stampede but for anti-oil types. By the way, the mayor of North Little Rock went. Nice guy, been good for that little town but does he need to go to Copenhagen? Sheesh.

  12. Packman – I think it moves back up when the market has had a little time to digest. Checking to see if they spoke or not at Southcoast.

  14. EXXI — think the stock has been kept down due to hedging activity by the convert holders. But that is not a continuous process. Once they are done, the stock should rebound. Noting the volume the last two days, thinking it’s pretty close to over. Thinking a move back to $2.25 or so as just the pressure of the convert hedging letting up. But, i was dead wrong on where the 2ndary priced (it was headed my way, but i think the increased size of the convert helped to tank the common, for a variety of reasons… like shorting into pricing by the preferred guys), so I don’t feel qualified to give my price opinions on EXXI here.

  15. Very Interesting:

    For two months in a row there has been downward revision: Sep. -1.5% to -2.3%, Oct 1.4% revised to 1.1%, and get this: “Special Notice – The advance estimates in this report are the first estimates from a new sample. The new sample for the Advance Monthly Retail Trade Survey is selected about once every two and a half years. For further information on the sample revision, see our website at http://www.census.gov/retail.” 

  16. BOP – don’t be too hard on yourself. Horseshoes, hand grenades, single digit midgets, 10 to 20% is probably as good as you need to be. If they make it work operationally now it will gen some strong cash flow in 2010. The lower stock deal price will be a distant memory then.

  18. TechTrader is out with a 75/35 call for the SHORT trade as working best today.

    HeadTrader thinks the mrkt can’t get any slower.

  19. I hear MMR has broken through the last of the hard rock which was burning up the equipment on Davy Jones and it “should” be to TD quickly.

  20. KWK getting marked up nicely pre open. I will have a list of the growth targets espoused by the Street so far. At the beginning of the decade, the smaller gassy names would often put forth targets of 10% and the big caps would come with numbers like 1 or 2% growth and the crowd was content. Now if you are not doing double digits the mentality is that something is wrong with you. All of the companies are, on a BOE basis so far, looking at 10%+ numbers. HK is at the high end in the 30%s and I bet SWN will be around 40% when they put out numbers. Not all of this is gas mind you. EOG is looking at a flat year for production of gas with it dipping in the first half, a controlled dip if you will. But most folks are going for growth by spending X$ to achieve Y-volumes due to the shales. Hedges are allowing this in many cases. I will be watching the growth of the bigger public names (and some sell side guys track the Top 100) as it will be important to see if what I’m seeing is just the early guys with good growth in the box for next year … because if everyone grows gas flat out, it will be up to the privates to decline to get us to lower production levels needed to balance the market.

  24. Jat – thanks. Their swing has been off of late. Used to move the stocks when they spoke. Of course, it’s a lousy, lousy, lousy day to initiate coverage. No one paying attention.

  25. Environment seems to be one of:

    ok numbers are good, but too strong a number and you get a dollar boost and Fed tightening fears.

  29. Z,

    Are you not worried that alot of the curtailed/shut in production from this summer/fall’s low prices will suddenly flood the market? I bet we turn on .3Bcfd alone in east texas/louisiana by EOY.

  30. NG reversed the opening profit taking, a lot more cold air coming for next week. The map around Michigan is going to look like VTZ’s map of Edmonton temps by Sunday.

  31. TEXW – It is definitely a concern. From the 3Q calls I listened to, it sounded like many operators had burned down their inventories of drilled but not completed wells by the end of the quarter. Not completely, as with KWK saying they have 30 to complete now. But substantially. I don’t know how many you guys have but I’d be a little surprised if the there was 300 MMcfepd ready to come on down there, given the small size of the play at this point. I know Oklahoma will see some shut in wells come in December / January from the Wash plays and from the Woodford. Have you seen a good aggregate drilled but not yet completed count anywhere in the public domain lately?

  32. Crude through $70 pretty sharply, at $69.75, just about has to be triggering some stops. Stocks watching the market a little more than they are oil for the moment.

    Meanwhile, natural gas up another 6 cents to 5.36, soundly through the November peak.

  34. First defense of $70 successful, back over the mark, going to be a long day, interesting into the close of NYMEX no doubt.

    Question for you techies. As you know I have a Toshiba Satellite, fraught with difficulties. Often, I get blue screened using the extra monitor or it just stops porting video to that monitor (no blue screen if I pull the plug quickly after a warning about a display driver). Am considering building a new box or getting a USB to VGA adapter. Suggestions?

  35. Z_ I use 2 evga uv-16 external video cards to power 2 extra monitors. Had them about a year with no problems. Actually picked up a 3rd on ebay last week for $25. I understand their are some issues with Windows 7, but there may be a new driver. The boxes are shirt pocket size. The UV-16 max resolution is 1680 x 1050. (Caution the UV-12 is lower res). The box has a dvi output, but they include a dvi-vga adapter if that is your need) Link to site:

    http://www.evga.com/

  40. Thanks again, yep, the one in 37 is the one I ordered. Took the Ask on AMZN as I don’t mess with Ebay that much and I’m an impatient type with tech stuff.

  41. Boss – yep, Toshiba had nothing new, they suggested it may be the actual port, a hardware issue. I made some suggestions about that to the guy on the phone.

    Crude back over $70 for the second time. Guy on CNBC says this is all end of year stuff, not related to supply and demand. I hear that every year with little better explanation.

    VNR moving on up. Mulling backing off some gas exposure in my GMXR common and add VNR soon…just thinking about next year and having more of my account 1) oily and 2) in the “paid to wait” camp. I’m getting about 20% on my money on yield in LINE and see no reason to stop. But I think VNR paying 12% now will have a better chance of capital appreciation.

  42. KOG – hmmm. Getting oversold in my book. Would like to see an update soon with some longer production averages and maybe a good look at the 2010 plan.

  43. Z: I see you sold SD. When I suggested that you should sell SD, was not about the stock, it was about you following your own investment rules.

    Some of my worst mistakes where made when I, through hurbis, would think that this time its different and would go against one of my investment rules.

  44. BSJ – yeah, I had been planning to for days since the second deal was announced, just didn’t want to sell with the news as that’s often not the best time. I still like them long term I think but I need to do more work on it to be certain.

  45. KOG — I would expect there to be an operational update out sometime next week. They should be done completing and testing well #9 by this weekend, unless something has delayed that schedule… like -20 degrees F at the drillsite.

  49. USEG priced their deal at a discount. This is the BEXP money partner. Odd, given how well BEXP has done for them on the first set of wells that raising money for a second set of wells should have been difficult.

  50. Choices – Chinese exports were down and although their imports were up, it’s not hard to figure that news pressures rates. The stocks aren’t really doing much of anything today.

  52. Kyle – map was in RBC’s latest first call note, the brokerage firm, on WLL. I printed it and flushed. Can someone resend that RBC piece and I will do snag it on the map? I will also look at ND industrial commission site which is I think where they got it.

  54. #49 — I think that says less about USEG’s prospects and outlook and more about the fact that we are in Holiday Trading Mode. No one used to try to issue debt or do an IPO between Thanksgiving and New Years b/c people didn’t care/weren’t there/hung-over from Holiday Parties/just-got-their-bonus-so-don’t-give-a-darn/or various other year end reasons to stop working.

    So, perhaps we are back to more “normal” conditions.

  60. Z: Short Interest: Biggest increases DNR +123.27%, COP +49.43 MEE +44.89 Biggest Declines CAM -60.37 SII -41.93 Biggest as % of float FSLR 24.24 TSO 16.95

  62. Crude back above $70, seems to be a crowd willing to defend that level. Volume was on the drops today though, so far.

    Tom – wait one second …

  63. Re #61, Hi bondbuddha…re KOG…from a technical perspective, I think there is a little bit of disappoinment with the failure of that daily triangle that, at first was picture perfect, then, it did not breakout like it should…., then tried to extend…, becoming a “sloppy triangle”, and now it’s obvious to even non chartists that it rolled over…also it does not help that the 20 day SMA just crossed over the 50 SMA, that’s short term bearish to a lot of technical folks…on the bright side…KOG holds its P&F buy signal until a print of $2.00 where it goes back into o’s, for folks considering an add to longs, consider just above $2.00, protective stop just below the P&F sell signal print at $1.75…

  64. Tom – saw Wolff’s comment. I think his price pullback for 2010 to $5.25 is the safe bet for him so I’m not going to target the guy over that. I would add that his pricing discussion seems to hinge on a combination of storage at then end of the withdrawal season and production trajectory which is fine but I think he is playing it overly conservative on both. He sees a storage trough in excess of 2 Tcf. I think its below that mark. He sees gas declines of less than 2 Bcfgpd YoY if I understand him, that’s on the low side of my thinking. Anyway, if I believed what he does about production and storage I’d go with a range of $4.50 to $5 for gas prices in 2010 or something close. Since I don’t I’m higher than where he is. I think perception will drive the stocks as much as commodity prices. I expect pretty firm oil and a firming gas price next year. I don’t recall for certain but I thought Wolff was in the “LNG Tsunami” camp this so ask him how that worked out, lol.

  67. Z: Wolffy is gaining a Gil Yang reputation in my eyes. It is always good to have negative indicators.

  70. For longer term positions I sometimes like to use the 100dma as a guide post. KOG was supported by its 100dma in April and again in early July. Presently it is testing it again. I added a little here.

  72. People think that Bernanke changed his mind since the beginning of the week and he’s actually going to raise rates now?

  73. MLP thoughts:
    My interest was based on the idea the Fed would force investors to take risk again by forcing them out the yield and risk curves. The 11/08 MLP conferences were the educational foundation. MLP group has had a big run. My personal guess is that LINE’s 10% yield is the bottom in this enviironment given volatile/uncertain economies, commodities, and markets. This is very subjective but corresponds to LINE’s yield from 1/08 until 8/08. Even with long hedges, my history says the market’s “normal” default yield requirement for REITs, MLPs, etc. is 10%.

    Distribution increase visibility is low at the moment. After the boom/bust of ’08-’09, how many Boards are going to be generous? Further, every co. has assets for sale, usually the orphaned or mature assets MLPs are set up to buy. Every MLP is saving cash to buy things in ’10, have done stock deals in ’09 for acquisitions, and will probably do more stock in ’10 for more acquisitions. (I don’t know the “formula” which relates acquisition price, market or hedged sales price, debt/equity mix, price/book at time of stock financing, capx needs, etc. = accretive production/share. It seems most acq.s recently were in the $2.00+/m range; EVEP says they want to pay around $1.50. “08 acq.s were much higher, paid for qith higher priced stock. VNR paid $17/bbl ($2.86/m) for an oily acq, which is $70,500/bbl/d. Seems high to me but I do not understand the math.)

    DCF coverage of distributions is high now, largely due to severe capx in ’09. At some point capx will have to at least increase back to the maintaince level which moderates production declines or keeps production flat. I don’t know what % of cash flow this is on average, but it is well above ’09 capx levels. So “excess” cash flow in ’10 goes to asset buys or increased maintaince spending and less to distribution increases.

    Question about the ability ot grow production/share: imp’t because this should lead to distribution increases cet. par. Caveats here are MLPs have limited public history, ’08-’09 are either not “normal” or are the “new normal”. Anyway, LINE’s prod/share seems to trend down slightly around .65b/sh, VNR is flat around .52b/sh. (NB: There are certainly data errors because I am using brokerage house data.) LINE has said they plan for low-mid single digit organic growth longer term. The others grow by acq. Net net: production/share is a work-in-progress.

    Distribution levels are a function of the smarts/luck to hedge at much higher prices. LINE and VNR have hedged well into ’13, EVEP is exposed in “10. Thoughts: 1. if the steep foreward curve flattens, long term growth slows. As $8 hedges are replaed at $6, cash flow declines > 25%. 2. if gas gets to backwardization, hedging won’t work at all, nor will the stocks. The mid-stream MLPs are expanding to the shale areas as fast as they can. 3. oil price declines could do the same thing. There’s lots of oil in the Bakken.

    General anecdotes:
    LINE and VNR are the only LPPs; the others are MLPs with various promotes to the GP.
    I don’t like the MLP/GP promote structure. Drop downs are financial engineering and my thought is usually the MLP loses.
    MLPs are tax efficient for mature producing assets as DDA expires. I think CHK has considered this. Canada showed investors there is risk in gov’t tax-dependent structures.
    I expect interest rates to rise. I am trying to figure out the effect on MLP yields, but I think it is bad.
    I own VNR because it was a small clone of LINE, and EVEP because the yield was high and insiders buying. I like the sound of these 3 mgts. I lost $ in EROC, thinking the Lehman hedge fund mgr would not go there to cut the distribution. Wrong! Complex MLPs are too difficult to manage vs. plain vanilla upstream MLPs.

  74. Re: #70, Hi john…re KOG…very interesting that the 100 day SMA which I have at $2.02, corresponds a few ticks above the P&F support level of $2, great when there is a confluence of support…I like to keep special track of the 200 day SMA because it is used by so many long term trading strategies

  75. V – Retail sales point to a turn in the economy so there is no more need, ever, to print more money. Bailout over. Utter hogwosh but that’s the scheme of the present.

  77. Thanks, RMD. I hope to be in a position to be looking for more dividend/interest paying investments next year. So please keep your thoughts and comments on MLP/LPPs coming.

  78. Z re 65: I played FSLR on the long side heading up to copenhagen for a nice short term trade. It seems to be stuck in the 134-135 range the last several days which was leading me to plan to do exactly what you were saying you were tempted to do.

    Of course, if oil runs back up to $80, that trade may end up being the wrong one since it tends to trade in tandem with oil.

  80. Choices – stocks just walking randomly here. Not a lot of volume in play. Oil and group ignoring equity markets. NG trading off with oil. Ugly Friday.

  81. TEXW and Tom ~ this does concern me, if the E&Ps return to their days of capital indiscipline before prices rise due to hedges and the effects of lower cost wells we’ll have a more lingering gas problem.

    Rig count watch:

    Oil up 10 to 393, vs 401 a year ago. That’s not much of a surprise.

    Gas up 9 to 757 vs 1379 a year ago. They just keep ticking this up despite a very tenuous gas market but they do it in order to keep their leases and because they have hedges on in most cases. It’s troubling, and I thought the little rally in rigs a month ago would be more contained than it has been.

  82. Comments from Market Strategist —

    In talking with our strategist this morning, we agreed that many of the hedge funds have “packed it in for the year”, while long only guys continue to “plant and prune”…buyer at the lower end of the range and sellers at the high end…also explains why volumes are running below avg. We haven’t had two consecutive days above the 50 day moving average of the US equity market since October (see chart below). We think that most “hope” for the market to stay in this trading range until Dec. 31 in order to get paid this year, or to stay ahead of their benchmarks etc. Econ this morn good (retail sales, Mich consumer conf), the USD has rallied, as have yields. Note that the 2yr-10yr curves close to being as steep as its been in 20 years…check out the spread graph below…def an outlier.. (also means a steep yield curve helps banks). Flows on the desk better for sale…as its been all week….2 to 1.

  83. Thanks BOP, does look that way, people seem a little worn out, analyst comments on the light side, probably lighter next week through year end.

  88. Housekeeping Watch:

    Note that the tabs at upper left have been reorganized under the E&P tab. Small, mid, large cap charts, hedges, MLP stuff all in their own spots.

  90. Z: Is there any number of total rigs that you would like to see? I thought Aubrey said to keep production steady he expected 1000 – 1100.

  91. Bakken operations question: is there an industry norm for how much oil storage you would put at a well given what production you expect? (This assumes you are trucking production out.)
    i.e., how often do co.s normally empty the tanks? Every other day, once/week, ?
    I suppose distance from the terminal and road or lease restrictions would factor in, as would being able to pick up tanks and more some to new wells flush production as the first’s production declined.
    Thanks for any info.

  92. Williston Basin Information. CLR has completed the Traxel 1-31H in SESW 31-146-89 as a producer in the Lodgepole formation that is shallower than the Middle Bakken . The Middle Bakken and 3Frks both appear to be wet and non-commercial in this well. This well is about 20 miles southeast of KOG’s #9. Tracker Resource’s Weisz 28-1H in 28-146-91 has made 7014 bo in a the last year from 9,000′ lateral with 33,636 barrells of water. This well is 8 miles south of the #9. I do not think that KOG will release any field reports for the # 9 this year because a weak well here with current price action could cause an accellerated decline in the stock price. They will not have any other completions until next year and they would like for their stock price to end the year as high as possible. They have been trying to go to a quarterly type update for wells so I can see them saying something to that effect in here. Just my opinion.

  94. Z did you put your 2pager on AEZ in the Reports section? You should (which is code for I’m long and care.)

  95. RMD – Its going to vary by well. Why? Did you hear NOG’s comments re EOG’s train loading station. Sounds like an indoor train yard. Sounds like it will operational sooner than expected as well, the WLL pipeline. Good news for area differentials to NYMEX and for people who are now trucking their volumes.

    West – wrong side of the pinchout eh, do you know if they were able to drill the vertical, then come up hole to the lodgepole as a bailout zone with the horizontal. I know to the south that Lodgepole is a primary target for them and ROSE is actually targeting the Lodgepole over in Montana. Hear you on a weaker well hurting the stock but it appears the “news” is already impacting the stock.

  97. This is all I wrote plus the table:

    AEZ Snapshot – Bakken Minnow

    * 70,000 net acres, Williston Basin, Goliath area, Williams County, North Dakota
    * Plan seems to be partner up with someone who give them a 100% carry or nearly 100%
    * I took a pretty harsh whack at the numbers below (both prospectivity of their acreage and potential reserves) as I give credit for wells drilled in a play, and until it is proved up through the drill bit you just don’t know. Given the location of the acreage, I would assume that they do better than this but again, got to get that bit turning.
    * On my severe whacking basis, this comes to $4.80 per share. Sensitivities to changes in the average reserve size of the wells encountered and in the $/barrel are listed at the bottom of the table.
    * On this basis, acreage would come to just over $3,000 per acre which isn’t unheard of in the play.
    * As they drill wells (someday), expect to see the valuation transition from acreage based, to potential reserves based, and much later to cash flow based.
    * I plan to start watching these guys and NOG a little more closely in the future.

  99. #92. A weak well would also make all of KOG’s estimated potentional locations and EURs for the lower 1/3rd of their property questionnable . I noticed that in their most recent presentation that they have taken out the part about estimated locations, %of acreage prospective and estimated recovery from Middle Bakken and 3 Forks, that they had previously shown.

  102. Tom – I would not call it that yet, it priced low but the dollar difference is pretty negligible, bad/unlucky timing, and a decision to take on more converts than in the original plan.

  103. #97; would you post page 2 which had the calculations? I wanted to use it as a template for ROSE? Thanks.

  105. West — when Stetson drilled that Middle Bakken dry hole, to the NE of KOG’s #9, did they go to the trouble of fraccing and testing?

  106. RMD – on a production basis, that VNR buy in Texas looks expensive but it had lots of PUDs with it, so on a reserves basis, $18/ barrel or $1.50 / Mcfe is not high. That’s Olmos stuff, like SFY’s field, hard to mess those up.

  112. IEA Cuts 2010 Non-OPEC Supply View on North America

    http://www.bloomberg.com/apps/news?pid=20602099&sid=aXs1Q6rUXuE4

    Dec. 11 (Bloomberg) — The International Energy Agency cut its forecast for oil supplies from outside the Organization of Petroleum Exporting Countries next year because of delays to North American projects.

    Non-OPEC producers, accounting for about 60 percent of the global total, will provide 51.6 million barrels a day in 2010, or 265,000 barrels a day less than previously anticipated, the adviser to 28 nations said in its monthly report today. Projections for non-OPEC supply through to 2014 were boosted as higher investment restores delayed projects.

    “Some changes were made to crude project start-up dates, especially in the Gulf of Mexico, resulting in downward revisions there,” the agency said. Supplies of natural gas liquids, or NGLs, from North America will be lower than the IEA had predicted.

    The IEA raised its forecast for 2010 global oil demand and boosted its medium-term consumption outlook through to 2014, on expectations of economic recovery.

    Worldwide oil demand is likely to average 86.3 million barrels a day next year, 130,000 a day more than previously estimated, the adviser said. Between 2009 and 2014 demand will average 1.9 million barrels a day more than the agency’s last medium-term projection in June.

    The IEA attributed the change to “much stronger-than- expected oil demand growth in 2009 as a result of massive fiscal and monetary stimuli implemented by governments across the world” and higher growth expectations from the International Monetary Fund.

    Demand Increase

    Demand worldwide will increase by 1.5 million barrels a day, or 1.7 percent, in 2010 compared with this year, led by China and India, it said. The agency left demand estimates for this year unchanged at 84.9 million barrels a day.

    “A key risk to the forecast pertains to the U.S. outlook,” the report said. “Demand remains stubbornly sluggish, with a continued contraction in distillate deliveries and very modest growth in gasoline demand.”

    Between 2008 and 2014 non-OPEC supply will expand by 700,000 barrels a day to average 51.4 million a day, compared with a decline projected in the IEA’s last medium-term report in June.

    “The outlook for supply overall has improved, with a higher price assumption and a widespread perception that the worst of the global economic crisis is over,” the report said. “Many upstream projects are back on the drawing board.”

    Output from OPEC, due to meet in Angola on Dec. 22 for a review of quotas, climbed to its highest in a year during November, averaging 29.1 million barrels a day, the IEA said. A lull in militant attacks on oil facilities in Nigeria was behind the increase.

    The compliance rate among the 11 OPEC members subject to production quotas slipped to 58 percent last month from 60 percent in October, with Iran and Angola violating their limits most, according to the agency.

  113. This is interesting… How shale success in the US is slowing Canadian gas reserve replacement.

    http://www.calgaryherald.com/business/Shale+Storm+energy+revolution+United+States+battering+natural+prices+squeezing+Albertans/2307944/story.html

    Snipped

    This “shale gale,” as renowned oilpatch author Daniel Yergin has termed it, is relentlessly moving across North America, driven by technology that has unlocked major stores of the fuel.

    And every Albertan, whether they know it or not, is caught in a downdraft, from out-of-work rig hands and rural hotel operators to white-collar executives in downtown office towers and ailing patients lined up in hospital emergency wards.

    The natural gas industry — long the bedrock of Alberta’s economy — faces major threats amid a fundamental shift south of the border.

    Massive stores of shale gas, once beyond the reach of engineers, are now being successfully squeezed out from under Texas and other U.S. states.

    Now Medicine Hat, the unofficial heart of Alberta’s natural gas industry for more than a century, is being battered by this shale storm, along with dozens of other Alberta communities.

    The abrupt slowdown in gas exploration is swelling unemployment rolls and bankruptcies, while choking off corporate profits and money flowing into government coffers.

  114. Re 111: getting long just in time to get buried?

    Jay in 113 – I know it. It’s obvious that we’ve been caught in the NG downdraft for the past 2 years. Our deficit is almost 5 billion this year but we still have the highest GDP per capita out of all the states and provinces in North America, net positive assets and a multi-billion sovereign wealth-styled “Heritage Fund”.

    Cardium drilling is basically the only action here ever since the royalty changes which spooked companies into moving to BC and Saskatchewan in the Montney, Horn River and Bakken plays.

  115. RE: Alberta political risk and royalties

    There was a poll released the other day that the Wildrose Alliance party (grassroots, currently just won its first seat) is winning in the polls with 39% as compared to ~20-25% for the ruling Progresseive Conservatives.

    The PCs have been in power since ’71 and are responsible for the current structure of the royalty framework and the recent changes.

    To me, this is real politics in action and I’m very happy to see that a new party is capable of coming into the system and winning based on a platform.

    They are right wing and would be favorable to the energy industry industry but could impose stricter environmental restrictions.

    They are suggesting more competitive royalty rates and lower corporate taxes. This could bode well for the energy industry and it certainly is looking like it’s going to bode well for Albertans.

    Overall it’s a really interesting situation in a world of cronie politics.

  118. VTZ – Don’t I remember that you work in oilsands? I have something I’d like to run by you offline if Z would hook us up.

    It would be applicable to in situ recovery but not SAGD.

    JR

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