Merger Monday

Posted on by zman

 

 

Market Sentiment Watch: Cautiously optimistic following Abu Dhabis $10 billion life line to Dubai. Also of note today that at Copenhagen were suspended following a walk-out by developing nations from Africa.  Oh yes, and Exxon finally did the deal and made a U.S. acquisition, scooping up XTO for $41 B (more on this below).


The Week Ahead:

  • Monday 12/14: No ecodata release.
  • Tuesday 12/15: PPI (forecast up 1%; core forecast up 0.3%), Empire State Index, Industrial production (forecast 0.5%), Homebuilder's Index (forecast 18 vs 17 last month)
  • Wednesday 12/16:  EIA Oil Inventory Report, CPI (forecast 0.4%; core forecast 0.1%), Housing starts (563K forecast vs 529K last reading), Fed Minutes.
  • Thursday 12/17: EIA Natural Storage Report, Jobless claims (forecast 465K vs 474K last week), Leading Indicators (forecast 0.8%), Philly Fed (forecast 17 vs 16.7 last month)
  • Friday 12/18: No ecodata release.

In Today's Post:

  • Holdings Watch
  • Commodity  Watch - with gas demand thoughts
  • Stuff We Care About Today - Catalyst watch, XOM acquires XTO
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $6,000
    • 15% Cash
  • The Holdings Tab will be fully updated for the Tuesday post ($10KP II, ZLT) - (I was in process when the XOM news hit)

 

Commodity  Watch:

Crude oil fell 7% last week to close at $69.87. Crude has fallen for 8 straight sessions and is now at a 2 1/2  month low, having fallen below $70 and out of its recent base. The 12 month crude strip is now trading at a still respectable $75.63. Overnight oil fell as much as $1.20, pure chart and Asia being off. Dollar is actually down a touch. Crude is now at 68.75 with obvious support at $66.  In recent weeks, OPEC leaders have pointed to $80 oil calling it "perfect". At this point, it should be considered "less than perfect" and  OPEC could point to still weak demand from the U.S. and cut back on deliveries to shore up prices. This morning crude is trading off 80 cents.

  • OPEC Watch: Kuwait signals no change in output next week ... apparently some had thought the Cartel would reduce output, at least according to a couple of stories I read but I find this hard to believe. Perhaps a tightening of the already stated quotas but I'd expect little more than that.

Natural gas had quite the opposite week from crude, rising 13% last week to close at $5.16 on the back of cold weather and a bigger than expected withdrawal from storage. The 12 month strip is now trading at $5.54. This morning gas is trading 16 cents.

  • Weather Watch: Coldest air of the season last week, somewhat warmer this week. Heating Degree Days (HDDs) compared to gas storage injections/withdrawals:

    • Week Before Last: 169 HDDs which was just short of last year and normal. This produced a withdrawal from storage of 64 Bcf. 
    • Last Week: 232 HDDs vs a prior forecast of 204, vs 206 last year and 201 normal). This should put the withdrawal north of 140 Bcf
    • This Week's Forecast: 192 HDDs, due to a warming trending in the Producing region (South).

Structural Gas Demand Watch: Last Thursday and Friday I made some comments about demand before the the weekly gas storage release. I realized at that time I did not add a demand component to the last set of monthly graphs (the ones that came out at the end of November with September data) and wanted to rectify that. As you can see from the following graphs, the slide in industrial demand was arrested (at least on a YoY basis) with the September data. Note also that while electricity consumption has been weak all year (generation is off a whopping 3.9% year to date according to the Edison Electric Institute) all generation share is not created equal. Cheap natural gas supplanted coal fired generation and September saw gas-fired demand rise 12% YoY. I'll bet this comes down slightly when they revise the numbers but the point is, gas generation is an important piece of demand which helped September to a year over year gain in demand. And the fact that industrial demand was flat with year ago levels confirms the anecdotal evidence we have seen (including those chemical rail car shipments that have jumped up) that all is not lost on that front either.

 

Stuff We Care About Today

Catalyst List Watch: ----

XOM Picks Off XTO

  • $41 B acquisition set to close by 2Q10 (25% premium)
  • Represents a major shift in thinking by XOM who before had retreated from the U.S. upstream (at least as a growth vehicle) preferring to target foreign reserves with big targets and often with lower tax regimes.
  • XTO was the only large cap set to see lower CFPS next year due to expiring hedges, and was trading just over 4x CFPS.
  • An analyst call with slides will be held at 11 am EST.
  • Nutshell: This paints targets on the all of the large cap E&Ps (APA, APC, DVN, EOG and I add SWN for size though it is at the bottom of the size class and is generally a one play show but is working to diversify) and probably the larger players in the shales including the Bakken (CLR, WLL), Barnett (KWK), Haynesville (HK first then maybe it filters down to GDP and GMXR who are short squeeze candidates), Woodford (NFX) and Marcellus players (RRC and UPL) as well.  See the Orange Charts on the tabs under E&P at upper left to spot who is cheap on forward cash flow and trailing reserves. 

Odds & Ends

Analyst Watch:

  • NFX - Barclays upped them to Overweight

Interesting Reading Watch:

214 thoughts on “Merger Monday”

  1. NG up 22 cents, easily offsetting Friday’s oil based dip and above the $5.30 level which was resistance, moving towards $5.40 now. Nice to see it responding to the big weather last week.

    Oil still down 80 cents, technically looks like it wants $66 or so.

  2. HK – nice bid over $23. My $22s are alive and kicking. The large caps are all called up strongly.

    Come to think of it, this should be a boon to the Service companies as XOM can drill more over priced rigs than just about anyone.

  3. Oh boy! In one fell swoop, XOM makes it “cool” to be holding energy stocks again. Should see some cash rotate back into the sector as a whole.

    Also, reading that domestic rig count up again. Even the land drillers! CHK added 5 rigs, it seems. So, the Service Kids should see a nice pop too.

    Merger Mondays… oh how we missed them!

  4. By the way, the SMH Energy Group bought themselves out of Sanders, Morris, Harris. They are now called “Madison Williams,” but it’s the same group of people.

  5. BOP – Roger that! We’ve been expecting M&A to kick up in the group and until now we had seen a definite positive move. This caps it. Note to CVX, COP and probably BP, time is short. Unfortunately for the short term, these M&A rallies often fade within a day or two as people say “oh, that’s one less potential buyer”. Personally I think DVN has put themselves up for sale with their announcement last month to punt the Gulf and International assets. APC probably comes next. Wonder if Congress would balk at BP or STO taking them out CHK.

  6. New Contest Watch:

    Pick the next E&P to be taken out and get a free quarter of subscription to the site. Send your picks in comments for all to see, first come, first serve. Offer limited to subscribers who are still subscribing at the time the deal is announced.

  10. TechTrader is 50/50 today. He won’t be trading.

    HeadTrader saying he would buy any sharp sell off, if it happens. He also points out that there are tons of eco#s out this week… so, maybe volume picks up over last week. That’s not a high hurdle to beat.

  11. Is this a short term put buying opportunity? I’ve seen this play out many times where u get a pop in the sector and a week later everything is 5 to 10% lower.

    Thoughts?

  13. Baylor – probably so (hence my comments in 5), I’m going to give it a day or two before going that way. I think the smaller names that get a big lift will be a better focus for puts as that’s just going to be less likely.

    If you submit a takeout candidate please put CONTEST in the comment so I’ll be sure and see it. Thx.

  14. Starting to see strategist calls for 2010. They are looking pretty rosy. Strategists pointing out that will all the cost-cutting, doesn’t take much in top-line growth to have a large EPS impact. Uniformly, they think Policy Risk/Washington is the #1 uncertainty (risk, bad thing) facing the markets next year.

    Might actually get a “January Affect” this year. Might wait a bit to buy puts. (Caveat, I stink at “timing”… so best to ignore that last sentence.)

  17. Anybody else notice COP 15 is stalled, and Lieberman may be stalling healthcare. Of late, the market has responded well to policy maker log jams.

  26. Cool – don’t worry if I don’t respond, Intern #1 will put this in Excel tonight and we’ll have it in the post tomorrow. And if I buy options or stock in your name and it does get taken out while I own it, that’s a free year and a tshirt and a mug. The T-shirts are the “he’s dead Jim” dinosaurs, a collectors item and a great Christmas gift.

  31. Offer void to bankers on the deal team.

    Little bit of a fade underway, arb spread on the XTO deal premium forming as XOM backs in a bit.

  32. Cargo – Watching those NFX’s, will give them another day. Same most everything else, including the HK’s, SWN’s…

  38. SWN looking alive, kind of a sleeper of late but it is too big to be a mid cap, too small to be a large cap but close. On the growth front I bet they can do 20%+ for each of the next 3 years, probably over 30, maybe as high as 40% when they come with 2010 numbers in February. That will get the multiple down further and make them very attractive … their concept of not hedging until prices rise is serving them better now but I’d like to see them come to the market saying they’ve hedged the first quarter soon.

  42. Crude even now, big recovery off the overnight lows. I’m looking for the OPEC rhetoric to become more hawkish on quotas next week as they lead up to their next meeting on the 22nd. COP 15 will have ended and they the Cartel will not give any supportive talk to crude before that as they don’t won’t to give the delegates anything to spin.

  44. Crude tripping through $70. I think the overnight weakness was a function of the chart. It may still “need” to go to $66. I think the walkout at COP 15 is probably significant.

  47. XNG up 4.3%

    OIH up 1.4%

    I think people are missing the impact of what having XOM come back to the U.S., spending a boat load of cash in North America means to service.

  49. WLT CEO on the tape punting 47K shares, part of this is his bonus (25K share), part a gift, still has 168K after the sale, stock off slightly.

  50. Seems to me that CHK’s various JVs would dilute an acquirer’s interest in them. And one JV partner might not want to be JVed with the others; but maybe they would.

  51. Everybody is now in play. Though I agree with TEX that ECA is a very likely choice. I do question CHK mergerablity though. They would seem to be a perfect choice, however they already have agreements with BP and Staoil. A major might not want own a company that has other majors as partners.

  52. SWN launching now, needs to get through Jerome’s $45 level, now 44.40. All of the stocks now have significant gaps which is going to be trouble in the near term when they back off the highs. Not chasing and not yet ready to take puts.

  55. BSJ – Hence my thought BP takes them out. Congress probably wouldn’t balk at a Brit doing it although BP has a bad rep in the states for spills.

  56. If GMXR goes out i’ll buy bondbuddha a t-shirt, coffee mug, bumper sticker and beer at the NYC IPAA meeting in the spring

  57. RMD and BSJ –

    APC, DVN, EOG

    APC actually makes sense to take out DVN to me but there is a definite culture class there so I just see APC buying DVN’s gomex and select international assets.

    EOG is pristine. Balance sheet, getting oilier. Makes so much sense to be taken out now, a lot more than before and it would be a perfect fit for COP, even the Trinidad LNG.

  58. Right now there is alot of short covering in all the gassy names. Since not everyone is going to taken over, after the current up thrust dies out, there are going to be some very unhapply bagholders out there.

  60. And BSJ – I think it boils down to market cap and purity of plays. Too small and you’re out. Too far flung in terms of lots of little projects here and there and you are beyond consideration.

  61. Z, Its been a while! Been busy, not that anyone would know! XOM hopefully kicking up the M&A dust a bit.

    The good news: since this XTO deal is an all stock deal, XOM still has a gazillion dollars in cash in the bank. Mucho dry powder and rumor they will do at least a couple more deals and XTO isn’t the biggest.

    The bad news: if XOM does indeed spend a bunch of money in the USA, look for gas prices to crater (again) and they won’t see +$6 for quite some time. Too much gas, not enough demand!

    The much worst news: I don’t have enough XTO in my account. Now if someone can entice McClendon, then maybe I’ll be in good shape!!

  62. Z: I agree with EOG. Class act, with top notch shale tech know how.

    What you might see is if a mid cap does not want to be taken over, to merger with some of the smaller cap names.

    Like OXY merging with VQ. This one makes a lot of sense. Both big in Calif, both with major interest in the Monterey shale. Matter of fact, I am looking for VQ to do something, because they are looking for a partner to help develope that Monterey shale.

  63. Here’s the thing about the XOM/XTO acqtn… i don’t think it means that gas drilling in the US picks up, per se. XOM needs to replace reserves in more politically stable areas. XTO is very conservative on their reserve bookings (like NFX), so I think XOM sees asset upside there. But I wouldn’t extrapolate that into more gas supply.

    Just a few thoughts.

  64. Mark – You know I’ll never give up where you work but but I always appreciate your thoughts. Ya know, XOM took out the one name that was late to the party in the Barnett and the Bakken. Figures. I wonder if the other Majors will respond. I also wonder if XOM will go oily and lots of acreage with the next one. They’ve been asleep for so long it is hard to believe they did this one. Their focus has long been foreign oil and LNG and with the current environment in the U.S., I wonder at this move. Maybe they are going green with gas. This could be a big boost to the NG powered car movement as well as they already have the stations, just add the NG pumps. Makes me want to look hard at NG pure plays like an RRC, UPL, SWN

  65. RE: 63 – I am probably talking my book, or hopefull thinking with VQ, since I own a big position in the stock.

  66. 63– good one

    oxy might have interest in sd as well. tom Ward likely willing to sell as he just dumped 2 m shares in the 8’s

  67. LOL… “talkin’ your book” is a GOOD thing. Nothing more convicted than an analysis by someone who eats their own cooking. (So, apologies, if i made “talkin’ your book” a bad thing… it isn’t. Just something to keep in mind when Bill Gross is spouting off, that’s all.)

  68. 1520’s What a kind offer, Merry Xmas to you too! I might even share my favorite Italian rest in the village with you!

  69. Z: when you have time, do you have an opinion on APEX — not as a takeover, but just a general point of view.

  73. And speaking of NG for transportation plays, CLNE off to the races again without me. I should just buy the stock and be done with trying to time that.

  74. I mean, if you are going to supply CNG to cars and trucks, it makes sense if you already have the stations in place, instead of trying to build them from the ground up. Probably a good thing for CUM as well as they have NG truck engine tech.

  75. For those who bought EXXI bonds… a little upgrade comment out this morning from a major I-bank.

    We are upgrading Energy XXI to Outperform from In-Line following its recent equity-financed acquisition of properties from MitEnergy. As a result of the acquisition, we believe asset coverage for EXXI bondholders has increased substantially, with debt/BOE decreasing from approximately $16 at September 30, 2009, to our new estimate of $9 at year-end 2010.

    The EXXI 10% of 2013 currently yields 14.2%. In our view, EXXI should no longer be compared with Caa3 E&Ps such as Delta Petroleum (15.7% yield) and Chaparral Energy (12.5%), but rather with companies such as Caa2/CCC+ rated Venoco (VQ). EXXI has similar proved reserves (76mm boe) and slightly less debt/BOE ($9 at YE2010 versus $10 for Venoco). EXXI also has more exposure to the stronger oil macro, with about 70% of production versus 44% for VQ. The VQ 11.5% senior secured bonds of 2017 currently yield 10.8%, while the EXXI 16% secured notes are yielding approximately 13%. We agree that EXXI’s 10% notes should trade at a discount to VQ because of the additional security, but we think the current 350 bp differential is too wide. We see 100-200 bp of upside.

  77. WLL knocking on $66. High here is $68, highest close in this cycle has been $65.75, so this would be a pretty good close.

    Volumes everywhere I look are about have of average daily or less, except in some of the big caps. EOG, DVN, and CHK already above their daily average.

    Most of the mids and smalls are up big on light volume. NFX a little better than half average daily, RRC a little better than that.

  78. Just to add to the comment in #76, if the EXXI 10s trade to 12.5% YTW (100bps wide to VQ), that implies a bond price of 93.10… as i recall, there were some purchases around 83 and 84 on this board… so, that implies a nice total return.

  79. Contest: In the Oil arena, NXY by Total. Also, In the Oil area two additional acquirers to add to the pool, SNP and KNO.

    In Natty, BP for either CHK or SWN.

    Sidebar: in Barron’s AMEX short interest tables this weekend, KOG rockets into the # 9 slot for largest increase and NOG owns #14 for largest positions.

  82. elija — thx for the short comments on KOG and NOG. Sounds like a high-beta bet against oil prices… interesting.

  83. SWN now largest gainer in the Large Cap E&Ps, up 7.5% after XTO’s 15% move.

    Director of research tells me his oil service guys are thinking much the same thing (positive) for the NAM leveraged OIH names. I read that as HAL, NBR, BHI, BJS, SLB. Not huge movement so far. Want to listen to how they will be directing dollars on this call. XTO was set to spend a little over $3 billion in 2009 so it will be interesting to see what XOM says about spending here.

  84. ZCONTEST:

    If no one has picked it, DVN is my choice. If already taken, APC is my second choice.

    Great day for me today since I had lots of XTO shares at $37!

  88. Imports watch:

    Big ups from last week, especially on the Canadian side. LNG at 1.8 Bcfpgd is a recent high. Not a huge pile of gas but still will give the bears some fodder.

  93. Z:

    I log in occasionally during market hours but read daily postings in the evening without fail. Excellent research, especially Bakken related names. Thanks.

  94. Exxon for XTO

    $41 B
    All stock + $10 B of debt
    Q2 close

    Why do it?
    1) Position XOM for long term success.
    2) XTO has substantial high quality, multi basins, technical expertise, proven track record.
    3) Creates catalyst for significant of long term growth of unconventional resources.

    mentioned the oil shale plays

    Guru –

  98. XOM – current focus in U.S. Piceance Basin and have a Marcellus Shale acreage and have a big position in the Horn River Basin. Again, this last puts a bullseye on EOG.

  99. You know, this takeover activity has been going on with the jr canadian trusts that have Cardian shale acerage.

  100. Comments from an oil service analyst to my query above:

    We agree xom has huge potential to spend so all nam service should benefit. But hal is most levered…this endorses intl shale in our mind.

  101. HK – Having a better day than many of its peers. CHK makes sense as a takeout but so does HK which has been massing up and is like a smaller CHK without as much debt and maybe a little less hubris.

  104. VTZ – Yes, watching the run for now, may have another day in it. Higher strikes most in danger of getting squashed by even a small pullback. Things augering for me holding on a little longer:
    1) NG going to see a big withdrawal this Thursday and weather is not too shabby after a little early week warmth in the southern U.S.
    2) Crude has had 8 down days in a row, time for a break from that. Really should see a heating oil based re-rally soon.

  106. XOM – we see significant demand for natural gas in the future. Already had big international LNG and domestic conventional reserves and now they have an uncoventional (shale) play.

  111. Right wronG or indifferent, I’ve raised a pretty sizeable amount of cash this morning on the recent pop. Many fares became reasonably profitable this morning with only 5 trading days left on December options.

    Fish is in the boat. Looking at put / short opportunities

  112. Still listening to the XOM call but marginal utility of the call is declining. They are saying the right things about U.S. gas demand, and returns.

    Housekeeping Watch: Follow us on Twitter under keyword ZmansEnrgyBrain

  114. XOM – call went well, very long lead stuff, value creation, etc. Note that the chart filled a gap today. I may go long for a trade in January calls.

  116. RE: #106, SWN held the 200 day SMA on 12/9/09 above the $39.50 mark, but had gone on a P&F sell signal with the print of $40, it needed to hold long term support and it did…the gap and print thru $45 today perfects a huge reversal “bear trap” back into x’s, SWN is pushing up against the P&F bearish trendline resistance as we speak, a print of $46 puts SWN back on a P&F buy signal…

  119. I am going to present the other side of the buyout. Sorry, old work habits die hard.

    Can not this buyout be viewed as a very bearish out look for nat gas? Simpson is cashing out his chips. He has been a long term bull on nat gas and has a fabulous track record.

    XOM track record of late has not been that stellar. They could have bought out any oil or gas company during last years crash, but didn’t.

  120. LNG export from US: I wouldn’t make that bet (other than small cargos that are re-exported from existing LNG import terminals, but that doesn’t really qualify). Reasons:

    – capital cost and environmental headaches to construct multi-billion dollar export facility

    – political headaches over getting an export license; piddly amount being exported out of Alaska drew hell fire from non-Alaskan Senator/Congressman

    – profitability/competitiveness: large sources of very cheap LNG already available that are much more competitive than US shale gas. Qatar gas is virtually “free” to produce vs shale gas in US which costs a minimum of $3 to get out of the ground and into the liquifaction plant; Australian CBM in large quantities is cheaper than US shale gas and is a lot closer to the mega-Asia LNG market.

    Just don’t see it.

  121. BSJ – That’s what Mark was saying above. I don’t know if it is very bearish, maybe a little bearish.

    XOM abandoned growth in the U.S. quite some time back and punted its Barnett reserves for a low price not that long ago, maybe a year. So putting them in charge of XTO’s assets could be viewed as more of a “return thing” than a “growth thing” for them. If you have conventional and non-conventional gas assets, you balance your portfolio spend based on gas prices. Right now, you’d rather have shale than exploration or some other conventional assets. So they may just apply fewer conventionally directed dollars and not flood the market. They would not talk about their spending plans.

  122. Mark — excellent comments. Agreed. Ain’t gonna see LNG exported in quantities from US. Can’t go head-to-head with Qatar.

  123. Mark – What about Chenierres recent FERC approval to get gas exported from their brand new facilities. Aubrey talks about doing this all the time now, used to sound like a joke, now not so much.

  124. z — interesting thing about XOM and their Barnett assets. There was an Old-Timer there (at XOM) who liked the Barnett play… and it was in XOM’s backyard, so they let him take the bit in his mouth and run with the play. It was just a “science experiment” to XOM anyway. It should have lead to more… but the old guy retired and none of the young ‘uns under him wanted to champion the play. Not “sexy” enough, I am guessing.

    So, here you have it, 2 yrs later, XOM has come full-circle. Guess a new senior guy got the shale itch.

    Lesson to you young ‘uns… watch the old farts… sometimes they really DO know what they are doing. (Which is a lesson I had to learn the hard way myself, in the oil patch, yrs and yrs ago.)

  126. BOP – I’m not saying it will be huge but a lot of that Qatar gas is going to Korea now, and then Japan. Asia is sucking up more gas every day. China just added a pipe project to bring in gas from Turkmenistan today. I don’t think it will be big but its possible it could be used to balance the market. Chenierre’s license was to “re-export” gas. So the cheap gas comes to the U.S., sits at the dock, and then gets sent somewhere else. Tell me how that one makes sense. Plus you know we export a lot more gas now than we have in the past, mostly to Canada and Mexico. We only send 3 to 4 Bcf per month to Japan.

    Good graph of U.S. total
    http://tonto.eia.doe.gov/dnav/ng/hist/n9130us2m.htm

  127. Well, in this merger, the smart guy in the room is Simpson, not those “suits” over at XOM.

    Of course none of this might matter in the short term, when other energy companies get that, “I can’t be left behind syndrome” that strikes usually sane people every once in a while.

  128. NG up only 6 cents. Discounting warmer weather this week and a big bump in imports week to week. Although honestly that would only add 7 Bcf to supply so it only looks big until you look at the supply figures. Gas in NYC was over $6 at the end of the weak and Canada naturally would push gas south and then east through the Northern Border pipe and the pipes to the east to capture those prices.

  129. Jerome – gotta ask about the XOM gap fill chart as well.

    XOM getting a big Bakken acreage position with this. They are the one obvious name missing when you look at the wells being drilled in the play.

  130. Thanks, z. Just don’t think it happens as a large shift in energy policy. Shipping gas out through existing pipelines is one thing… getting the DOE to permit larger scale export of US-based LNG is another.

    Like, we can talk all we want about how the US and China are trading buddies… but when it comes to China trying to buy a US company. Well, that’s a different kettle of fish all together.

    Great discussion, tho.

  131. BOP – I think it’s more likely that XOM lobbies to increase U.S. demand for natural gas. Natural choice is transportation.

  132. Z – I would like to see the suggestion you made earlier materialize about XOM using it’s network of affiliated gasoline stations as a platform for a large scale nat gas filling station network. I had a discussion with my father in law about this when CHK was talking about this a while back. My point then was that CHK had no distribution backbone, or ability to site nat gas pumps nationwide. XOM is a different story. Not sure how likely this is versus LNG exports?

  133. z — #132… yeah. Was thinking that too. XOM does think long-term. They are obviously thinking they can move the needle on NorthAm natty gas demand. But, I also think it’s about their reserve decline in risky places.

    With oil up over $45 or so, there are a lot of reserves that come off XOM’s books due to international production-sharing agreements. XOM was in the “oil won’t stay at $70 camp” for a long time… in part b/c that way they didn’t have to take the reserves off. (Convince your auditors that it’s only a short-term move in oil prices, so no reason to remark the assets/reserves.)

    But sustained higher energy prices means XOM has got to replace those reserves in more politically-stable locations.

  135. RE: #119, XNG triggered a P&F buy signal today with the print thru $520…it’s interesting to compare XNG to an ETF like FCG which also reversed back into x’s today…there are a good deal more stocks in FCG and the mix is a bit different, but the relative strength between the two is thus far about equal, it will be interesting to see how each performs given the stocks tracked in each index….

  136. BOP – At present I consider the U.S. a “risky place” as well, lol. Not Somali risky to be sure, or Venezuela risky but call it Pelosi risk.

    Thanks again J.

  137. z — totally agree. Totally. But, so far, Pelosi Risk has not (yet) risen to the level of Chavez or Putin Risk… so, it’s all relative.

    But totally hear what you are saying.

  138. Another summary of the call today —

    ExxonMobil to acquire XTO Energy Conference Call Highlights

    ExxonMobil views the transaction as consistent with its focus on sustainable long term value creation

    The company believes unconventional shale plays will be a major part of the energy industry going forward, and believes this deal will help to appropriately position the company for the next 10-20 years
    XOM believes the deal will be accretive to production and cash-flow growth, but will not be immediately accretive to EPS

    XTO’s assets enhance Exxon’s shale play exposure

    The combined company will have 8 million total acres
    The acquisition will give Exxon exposure to the major shale plays in North America, as well as global shale plays
    XOM believes there will be significant demand for natural gas in the future, making the shale plays an important resource going forward

    XOM will establish an upstream organization to manage its unconventional resources

    XOM indicated that it is always looking for additional acquisition opportunities

    Management noted that the deal leaves the company with the financial flexibility to do additional acquisitions if it sees attractive opportunities
    The company will continue its ongoing asset management program and will make some divestments every year, but will make no major changes to the program with the addition of XTO’s assets

    What to watch for

    Regulatory review
    2010 combined budget

  141. I am just wondering the relative shale expertise in XON vs. XTO. Is XON significantly adding to their knowledge base by adding the XTO team (which the deck indicated would remain in Ft Worth)? If so, can XON exploit the European (page 8 of the deck)(and other) shales faster by having the XTO people on board now, rather than trying to grow organically? That would make it more interesting, to me at least, than only buying US reserves…

  142. Excellent discussion today-thanks all.

    EXXI 10’s-thanks for the update, BOP.

    Currently on IB: no bid, ask 90, last trade 88.25. No trades today.

  143. #130 XOM… XOM went on a P&F sell signal with its gap down thru $70 today, but….”bear trap” alert…XOM is holding the 200 day SMA right above $69 which corresponds with support right at P&F trendline in the same price zone, support holds until XOM breaks below $68…

  144. Rateberto – XOM indicated as much on the call and it makes sense that XTO would have the skillset or at least more practice at it. I would have bought EOG if I was looking for the skills but its probably not that big a delta.

  145. Jerome – My thought is the analysts covering Majors call their E&P counterparts today and decide what to do to XOM ratings and price targets in the morning. Anyone know what Goldman thought of XTO of late? and of XOM for that matter? If a big name green lights this deal it could get back today’s dip in a matter of days.

  146. EXXI 10s… even at a bond price of 90, that is a yield to maurity of almost 13.7%. Still not bad.

  147. Adding to 146. Major analysts and E&P analysts are different shades of the same coin. On the call it was apparent the Major analysts did not have a good handle (yet) on what XTO brought to the table from a reserves upside and technology standpoint. So they get an education from their resident E&P analyst this morning and afternoon and make changes to the model and then come with new #s in the morning.

  148. #100 “You know, this takeover activity has been going on with the jr canadian trusts that have Cardian shale acerage.”

    Most recently, HTE by Korean Nat’l Oil. HTE is a mishmash of average assets (including some Bakken) that got over levered and got a rescue bid at 10.00.

    Only reason I mention this is that at 9.38 with a 6% yield paid monthly and little to no financing or regulatory risk this seems to be a reasonable merger arb opportunity.

    I’m long very small as a substitute for some trading cash (which virtually ensures that their refinery burns down invoking a MAC clause event prior to close!).

  149. Re 145: I agree on should have bought EOG. The “suits” at XOM bought Buick when they should have bought the Cadillac. Both good companies, but tech wise I think EOG was the way to go.

  150. Good to see my NOG waking up, looking like it wants to go $10, still may add some common there but holding the Jan 10 calls for now.

    RMD’s AEZ waking up as well.

  152. Chenierre’s re-export is a small fry deal…some LNG is forced to the US when there isn’t a market for it elsewhere. That occurs from time to time. That’s why it ends up going to the US but its then worth more to ship it back out. When prices are low in the US, then the re-export makes some sense if there is a good market to go to.

    In terms of exports, we export 40-50,000 MMCF/month to Canada, BUT we IMPORT over 250,000 MMCF/month from Canada. So we are a NET IMPORTER from Canada. The gas comes from one part of gas-rich Canada and goes to a gas-poor section.

    I still don’t see it as a good capital investment or a politically doable option as long as there is the current make-up in our country’s legislature. Maybe (hopefully) that will change. I like the export idea, I really do. I just don’t see it working out!

  153. re 150: who’s to say they aren’t going to need to buy TWO cars? They will need the Buick AND the Cadillac! And maybe a Chevy as well! Don’t think this is the end for XOM. Remember, they didn’t use a dime of their tremendous cash hoard to do the XTO deal. They bought back millions of shares of their own stock over the years; they can just use some of that!! And still have more cash in the bank than most banks!!

  154. Mark – I know it well. Not worth arguing just saying we do send it out of the country and we are sending more and more each year down south as well.

  155. Only bigger guy on the list Mark, is APC, DVN a close second in terms of TEV. Frankly APC makes more sense to me but lacks the shaliness of DVN. Buy APC and you get more W. Africa and a lot of Gomex.

  157. GMXR – broken out of its base, low volume however. I have mentioned selling my common here recently to swap into something with yield and with oil and may do that this week.

  158. ROSE hit its 52 week high today but also on very light volume. A lot of people are sitting on the sidelines, not wanting to chase this move. Can’t say I blame them. News there sounds a bit delayed but could still come before Christmas or New Year’s.

  159. Z-re#152-appears to be a spread to my uneduated eye:

    Feb 25 puts: vol 10,574, bid 1.25
    Feb 29 calls: vol 10,324, bid 1.25

  162. Contemplating a WILDZ in XOM before the close. Smallish in the Dec. $70 strikes which trade like water with a penny spread. They either catch an upgrade or get forgiven a bit before Friday and rise or they tumble and the calls die worthless. Thinking about the Jaunaries as well as a safer but much less price leveraged play on an upgrade here.

  163. Market just flatlined today without data, feels like it will drift higher into the close to me at least.

    NG up 11 cents and not trading much,

    Crude off 35 cents now, despite a weaker dollar, just looks technically a bit weak. Today would be #9 day down in a row, marking the longest stretch of down days this year.

  164. ZTRADE:

    WLL – Sold the December $60 call for $6.60, up 35%, with the stock at $66.70. I continue to hold the 10 $65 calls.

  165. With apologies to the lawyers on the board, one had to know that legal activities would be associated with XOM/XTO deal-it did not take long.

    Business Wire report that Levi & Korsinsky investigates breach of fidiciary duty by XTO Board by not adequately shopping XTO or selling it too cheap.

  167. Choices – Cramer going through the payout for Simpson. $171 mm to sell out or $6 mm to retire. Hmmm. Choices, choices.

  168. WLL – $67.25, glad I held the $65s, will hold them at least until tomorrow. I hold the common there as well.

    ROSE back to just under $19.

    XOM looks to be taking some flak over Simpson’s payout and the price per Mcfe (roughly $3). I think that’s forgiven in pretty short order but who knows, could be all kinds of conflict of interest stuff to drag the deal lower a bit so I’m not going to do my wildz mentioned above.

  174. Jerome – Does WLT look like a clear breakout to you now?

    HK volume over 7 mm shares, good to see but all these gaps have me a little concerned about when this slows down. The group could run another day or two, largely depends on the broad market. Can;t imagine you will get bigger news than today’s for the next couple of months.

  177. what a great entry you made in WLL at just under $60 in the common…I bought some then too…been shaken out time and again from WLL and EOG…just rebought them and put them on ignore

  178. Thanks Jivey, I would have felt late to the game looking at the chart but the CFPS made it somewhat easy to go ahead and get long. Planning to be there for awhile but would come out if it goes too far to fast, say upper $70s and CFPS isn’t rising to match. That could happen if oil stagnates in the $60s for a quarter or two.

  179. #175, Yes, looks great right now…the move thru $73 printed another x on the P&F chart breaking outside the consolidation resistance at $72, the $72 level should hold intraday and major outside day time frame support again at $70…

  180. KOG — why would they complete well #9 with a 19-stage frac job, if they thought it was a duster? I think People who are writing off the 1/3rd of KOG’s south-of-the-river acreage will find themselves wrong. Should know soon.

  181. Tomorrow we have:

    PPI (forecast up 1%; core forecast up 0.3%), Empire State Index, Industrial production (forecast 0.5%), Homebuilder’s Index (forecast 18 vs 17 last month)
    BBY tonight I think as well.

  182. eli – #149 – HTE deal at $10 canadian. have suspended their distribution. i just sold mine cause now its strictly a bet on usd/cad spread.

  183. Also, now hearing some positive buzz about Davy Jones. The hews here changes day-to-day… but sounding more promising now.

  186. kyleandy it paid last month however with the special meeting date of tommorrow your point is well taken. If I were not involved I would bet that full close would occur before year end in which case the “total return” less a divi is a-okay. As I am involved these gum balls will probally vote not to proceed!

  187. re #170- SWN production and Capex guidance for 2010 should be out Wed or Thursday (historically out this week)

  191. BEXP with nice announcement, and of course USEG also benefits.
    AUSTIN, TX–(Marketwire – 12/14/09) – Brigham Exploration Company (NASDAQ:BEXP – News) announced that its operated Williston 25-36 #1H produced approximately 3,394 barrels of oil equivalent per day (2,769 Bopd and 3.75 MMcf/d) from the Bakken formation during an early 24 hour flow back period. The Williston was completed with 32 frac stages and represents Brigham’s highest reported 24 hour flow back rate in the Williston Basin. Thus far, Brigham’s nine long lateral high frac stage Bakken and Three Forks wells have averaged an early peak production rate of approximately 2,066 barrels of oil equivalent per day.

  193. John – thanks for the heads up. I had a Williston ## well on the Catalyst List, need to go and see if I just typed in the wrong number or if this is a different one. Wowser on the rate. If methodology is the same then the trajectory is definitely in the right direction.

  202. Bedtime Market Strategist

    Dubai’s Round Trip Ticket

    The previous closing high on the S&P 500 was 1110.63, registered November 25th. Today the S&P 500 registered its first new closing high in 2½ weeks. The irony, of course, is that November 25th is the date that Dubai World announced it was seeking to restructure its debts and placed repayment of the Sukuk on its maturity date of today in doubt. Abu Dhabi, the seat of power in the UAE, opted not to let Dubai default, which could have erased the region’s financial progress in recent years. In the interim, U.S. Equities have spent the time building upon the 2.75% consolidation range that started approximately a month ago. In addition, the economy received its best jobs report in several years. Today’s new closing high is hardly a definitive breakout, but the stage is set for a bigger move. Five of the ten S&P Sectors hit new 52 week highs. Health Care, Telecom and Utilities have been breaking out. Consumer Discretionary started breaking out last week. Industrials, led by Transports, started breaking out today. Technology has set the stage to breakout in the next couple of days. All that is necessary for a nice push higher is for either Energy or Financials to join the move. Remarkably, all of this has transpired as retail has been a continued seller of domestic equity mutual funds, which, as of latest data earlier this month, have not seen inflows since July. This is a pretty good situation considering the potential jet lag a round trip can give you.

  204. #181, BOP not trying to say that # 9 will be duster, but that it might not be economic at current prices. I’m trying to project what might happen to share price if they had a weak ip for well #9.Stock action suggest to me that parties are betting on lower prices. Probably more information than is needed but here is well information from Hunt well in Parshall Field and BEXP well that is 4 miles due east , showing how fast the formation can change and EURs. I think that I had mentioned to you that field reports suggested that the #8 had encountered some water zones in the outer parts of the lateral. Initial Reports suggest that the # 9 is hauling water from site (which is at least partially frac water) and that there is no visible flare. Maybe they have the well shut in waiting testing or 1000 other options. I have moved to the sidelines awaiting further developments of a more concrete nature.I would consider a big drop in the price a golden buying opportunity.NDIC File No: 17145 API No: 33-061-00701-00-00 CTB No: 117145
    Well Type: OG Well Status: A Status Date: 11/12/2008 Wellbore type: Horizontal
    Location: SWSE 30-154-89 Footages: 230 FSL 1797 FEL Latitude: 48.1250870324836 Longitude: -102.166764288013
    Current Operator: HUNT OIL COMPANY
    Current Well Name: KULLAND 1-30H
    Elevation(s): 2198 KB 2170 GL Total Depth: 13760 Field: PARSHALL
    Spud Date(s): 8/31/2008
    Casing String(s): 9.625″ 2015′ 7″ 9624′
    Completion Data
    Pool: BAKKEN Perfs: 9624-13760 Comp: 11/12/2008 Status: AL Date: 4/9/2009 Spacing: SEC
    Cumulative Production Data
    Pool: BAKKEN Cum Oil: 130705 Cum MCF Gas: 41624 Cum Water: 33619 [Interactive Performance Curve] [PDF Curve]
    Production Test Data
    IP Test Date: 11/22/2008 Pool: BAKKEN IP Oil: 980 IP MCF: 323 IP Water: 609

    Monthly Production Data
    Pool Date Days BBLS Oil Runs BBLS Water MCF Prod MCF Sold Vent/Flare
    BAKKEN 10-2009 31 7514 7174 1392 2904 2350 93
    BAKKEN 9-2009 30 8246 8159 1567 2652 2642 10
    BAKKEN 8-2009 31 9599 9710 2043 3072 2632 440
    BAKKEN 7-2009 31 10687 11224 2195 2981 2483 498
    BAKKEN 6-2009 30 11739 11105 2485 3565 3221 133
    BAKKEN 5-2009 30 12422 13040 2580 4063 3006 500
    BAKKEN 4-2009 30 11227 10796 2149 3774 1276 1922
    BAKKEN 3-2009 31 9598 9552 1551 3299 1 2703
    BAKKEN 2-2009 22 5876 5651 819 1784 0 1329
    BAKKEN 1-2009 31 11011 11751 1562 3427 0 2832
    BAKKEN 12-2008 31 18062 19014 3451 5106 0 4511
    BAKKEN 11-2008 16 14724 12157 11825 4997 0 4997

    ……………………………………NDIC File No: 16840 API No: 33-061-00580-00-00 CTB No: 116840
    Well Type: OG Well Status: A Status Date: 1/2/2008 Wellbore type: Horizontal
    Location: NENW 26-154-89 Footages: 330 FNL 2210 FWL Latitude: 48.1380222971047 Longitude: -102.085354690368
    Current Operator: BRIGHAM OIL & GAS, L.P.
    Current Well Name: BERGSTROM FAMILY TRUST 26 #1-H
    Elevation(s): 2020 KB 1998 GL Total Depth: 13520 Field: PARSHALL
    Spud Date(s): 10/31/2007
    Casing String(s): 10.75″ 2010′ 7″ 9017′
    Completion Data
    Pool: BAKKEN Perfs: 9017-13522 Comp: 1/2/2008 Status: AL Date: 1/25/2008 Spacing: SEC
    Cumulative Production Data
    Pool: BAKKEN Cum Oil: 27611 Cum MCF Gas: 13281 Cum Water: 48498 [Interactive Performance Curve] [PDF Curve]
    Production Test Data
    IP Test Date: 1/25/2008 Pool: BAKKEN IP Oil: 277 IP MCF: IP Water: 332

    Monthly Production Data
    Pool Date Days BBLS Oil Runs BBLS Water MCF Prod MCF Sold Vent/Flare
    BAKKEN 10-2009 31 650 638 1187 930 0 930
    BAKKEN 9-2009 30 681 657 1134 900 0 900
    BAKKEN 8-2009 31 736 887 1104 903 0 903
    BAKKEN 7-2009 31 733 639 1206 910 0 910
    BAKKEN 6-2009 30 752 618 1222 900 0 900
    BAKKEN 5-2009 31 800 877 1339 930 0 930
    BAKKEN 4-2009 30 904 681 1563 351 0 351
    BAKKEN 3-2009 28 727 927 1147 291 0 291
    BAKKEN 2-2009 28 796 937 1241 305 0 305
    BAKKEN 1-2009 31 918 888 1455 352 0 352
    BAKKEN 12-2008 31 970 1141 1580 368 0 368
    BAKKEN 11-2008 30 953 723 1635 369 0 369
    BAKKEN 10-2008 31 1045 1324 1840 406 0 406
    BAKKEN 9-2008 27 1080 1433 1844 422 0 422
    BAKKEN 8-2008 30 1192 1073 1966 468 0 468
    BAKKEN 7-2008 30 1273 927 2194 486 0 486
    BAKKEN 6-2008 30 1363 1119 2347 527 0 527
    BAKKEN 5-2008 31 1593 1643 2781 626 0 626
    BAKKEN 4-2008 30 1755 1894 3125 700 0 700
    BAKKEN 3-2008 31 2443 2482 4646 962 0 962
    BAKKEN 2-2008 28 3441 3513 7625 1020 0 1020
    BAKKEN 1-2008 18 2806 2234 4317 155 0 155

  205. west #205… no flare yet, eh? Could still be getting back frac fluid. But, I do think #9 is nothing to write home about and KOG is trying to figure out a way to put out the news w/o tanking the stock. Especially as BEXP keeps putting up those monster results.

    Seeing headlines that Sumitomo signs a shale agreement with CRZO.

  206. I also think that is why KOG did their 2ndary before knowing the full results of #9. People know this, of course. But, stocks have a funny way of going down (or up) on news that you could SWEAR… “but everyone already KNEW that already!”

  207. I don’t think that the XTO deal will change anything as far as their operations in their AIM with KOG but it might. All recent permitting and hearing activity has centered on the Heart Butte Field and I think this is where the first dual well for Bkn and 3Fks will be drilled next year. Do you think that XTO’s deal precludes them from making any acquistions during the interim or probably have a $ size limit. If so STR would be in the drivers seat to marry KOG.

  208. oh, I do think KOG wants to get married… they just don’t like the size of the ring that has been offered so far. They think they are much better looking than that!

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