16
Dec

Wednesday = Fed Grammar Watch

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Market Sentiment Watch: Feels like sentiment is leaning a bit more bullish, sleepily for sure, but bulllish as we approach year end. I don't think the Fed is going to say much this afternoon to disrupt that. I plan on exiting a majority of the remaining December calls today.

  • Eco Data Watch: 
    • CPI of up 0.4% vs forecast of 0.4%; core forecast 0.1%,
    • Housing starts of 574K (up 8.9% YoY) vs 563K forecast and 529K last reading,
    • Fed comments will be out this afternoon and the Street will as usual dissect every syllable for clues as to when we go from stimulus to exit mode. Watch for a new sentence on inflation (who knows, maybe they say it is "contained" instead of "well contained"). The dollar's recent rally will no doubt hinge on this. 

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:

    • $15,900
    • 39% Cash
    • The quick holdings part of the Holdings Tab is updated.

 

  • Yesterday's Trades:
    • BEXP – Sold the (20) $12.50 January calls for $0.85, up 172% with the stock at $12.50. I continue to hold the $10s and the common and will rebuy this on a pullback before the next set of data.
    • WLL – Sold the (10) December $65 calls for $2.70, up 16%. Will roll to longer dated calls after a pullback from these levels. I continue to own the common.
    • HK – Sold the (10) December $22 calls for $2.10, up 75%. Plan to roll to Januaries soon.
    • SWN – Added (10) January $45 Calls (TKQAI) for $1.80. Will punt the $43 Decembers soon. Also still hold some worthless Dec $45 calls here and the common.


Commodity Watch:

Crude oil bounced $1.18 to close at $70.69 yesterday, breaking a nine day losing streak, despite a resurgent dollar.  After the close, the API released data that showed an unexpected big build in crude (could be imports so not that important) and a large draw in distillates which, if it is reflected by EIA (and I expect it to be), will be more important for crude pricing (supportive) through the end of the weak. However, if we get bearish looking data in distillates today (again, not expecting that) then I would expect crude to break back down through $70 with a glide path homing in on $66.  This morning crude is trading higher on Iran.

  • Iran Watch 1: Oooohhhh Scary, Fresh Sanctions. The House passed a fresh set of sanctions, this time against any country shipping gasoline to Iran, and while you can almost hear Ahmadinejad yawn from here, gasoline is a pinch point for the dictator who imports his gas to stay in power. Local fuel exports have said it will be impossible to cut off the flow.
  • Iran Watch 2: Check Out My Shiny New Long Range Missile. Iran says it successfully fired the Sejil 2, a solid fuel missile with a "longer range" than Iran's 1,250 mile capable Shahab 3.  The test came just after the sanctions above were passed and Iran State TV claimed the missile hit it's target.

Natural gas rallied over 3% to end the day up $0.19 at $5.52. The gas chart looks like this now. This morning gas is trading off slightly.

  • Chevron Shale Gas Comment Watch: Chevron says any "foray in shale gas must move the needle". CEO and CFO have made comments in the last few weeks indicating they are interested in shale gas deals but only in ones that would be of significant size, hence my comments on Monday about the bigger names being more caught up in merger fever than the small ones.

 

  • Early Read On Natural Gas Storage: Street Consensus: 178 Bcf Withdrawal, well above normal due to the much colder than normal weather we saw last week; HDDs were a whopping 232. Note that this would be the highest withdrawal for this week on record.  My modeling indicates it could come in slightly under the Street's number.

    • Last Week: 64 Bcf withdrawal - on Heating Degree Days of 169.
    • Last Year: 116 Bcf withdrawal - HDDs were 205.
    • 5 Year Average: 108 Bcf withdrawal - normal HDD reading is 189.
    • 10 year Hi: 162 Bcf withdrawal - HDDs were 243 in this week of 2005.
    • 10 year Low: 43 Bcf withdrawal - HDDs were 112 in this week of 2001.

Oil Inventory Preview


API Watch:

  • Crude: UP 0.924 mm barrels
  • Gasoline: UP 2.074 mm barrels
  • Distillates: DOWN 2.604 mm barrels.

ZComment: Distillates. While the API numbers have appeared to be hard to fathom of late in terms of the inventory numbers jiving with the demand and import pieces in the same reports, I have noticed that EIA and API have been agreeing on the direction of the inventory moves. Today it's pretty important for distillates to show an increase in demand and a drop in inventories. If we see distillate inventories fall by as much as API showed last night I'd expect a buck add to crude prices, even if crude shows a build on an imports bump. Conversely, if we see bearish looking data, including an unexpected build in crude, look out $70 and in coming days, $66.

Stuff We Care About Today

 

AREX Quick Snapshot for BSJ

  • Small cap E&P, gassy (82%), focused on west Texas (90% of reserves) with a smaller acreage position in E. Texas (Cotton Valley and Bossier Shale).
  • 4 rig program: drills lots of small reserve target, low risk wells gas wells in Texas, your bread butter drilling
  • Upside could come this summer from Mancos Shale exploration on 80K net acres Northern New Mexico - probably warrants a little more digging into their plan here.
  • Hedged for just under 45% of expected 2010 gas production.
  • Low costs for a little guy:

    • LOE of $1.09 / Mcfe;
    • Cash costs should be about $2.25 / Mcfe next year - good cost control
  • Mid point of guidance puts them at 3% growth in 2010 @ 25.1 MMcfepd although management points to 3Q09 production and shows growth vs that point will be 19%.
  • Reserves:

    • 211 Bcfe - Given their EV of $167 mm, its not expensive on a reserves basis
    • 20 year RP ratio
  • 2010 P/CF of 3.6x - so cheap on that basis too.
  • Deb  to cap of 14% - low and the plan is to reduce or hold flat in 2010.

Nutshell: Solid. Stable. Low risk. Low cost producer. Cheap. Double digit growth. Boring (which contrary to popular opinion isn't a bad thing). All of these words and phrases come to mind when looking over the company. I don't see a big reason to run out and snap it up right now as in this market, cheap things can stay cheap for some time if there is no catalysts and limited coverage. At this time, there are only a handful of analysts covering it (perfect for RMD to check out) and I don't see a Street worth catalyst until they kick off a Mancos test. I would note they are sitting on a small Bossier position in E. Texas that could garner some attention in 2010 as well.

FSLR 2010 Guidance Call at 4:30 PM EST today. I will listen but will not play prior to the call.

Quick Solar Thoughts:

  • Sales have reaccelerated in the last few weeks, advancing as prices have continued to fall through the Summer and Fall.
  • Photovoltaic (PV) solar inventories have fallen - more details on this in the next few days.
  • Polysilicon prices have tumbled which will help the PV makers who have been slashing prices. 
  • Big deals are being signed, U.S. appears poised for further backlog building in 2010 as more utilities roll out larger projects.
  • Demand in Europe is still suspect as subsidies end or are scaled back.
  • I'll have more comments tomorrow.

 

Odds & Ends

Analyst Watch:

  • (SWSI) cut to Hold at Canaccord
  • (SPWRA) initiated at Outperform at JMP 

157 Responses to “Wednesday = Fed Grammar Watch”

  1. 1
    milepost_43 Says:

    EXXI divy hit the account yesterday…thanks….

  2. 2
    jat Says:

    Hey Z,

    Can you remind as to how end of year refinery inventory concerns may be affecting cushing storage? this is something I remember every year and then promptly forget.

  3. 3
    zman Says:

    Crude up 50 cents, expect that to be tentative pre numbers.

    Watching the NFX and EOG calls for an exit today for breakeven or so. Also the SWN Dec calls for an exit. Am likely to add Jan NFX for a possible announcement next week.

  4. 4
    zman Says:

    Jat – I wrote something smart on that last year; let me see if I can dig it up. Whenever there is a large build in crude inventories in a week near the end of the year you always hear that it’s a tax related issue, about carrying finished product inventories into year end for the refiners (they’d rather not). Usually not much impact on prices.

  5. 5
    zman Says:

    NG already recovering from a pre session dip to go green. Strong work there. If the distillates do show demand growth expect another pop there.

    Gold up $9

    If SWN pushes $45 unsuccessfully this morning I will back out of the Decembers, would like to wait on the number but SWN is my single largest option position by a ways now as I pre rolled to January yesterday.

    BOP – any HT or TT color?

  6. 6
    RMD Says:

    AREX: it has been a while since I read anything about the Mancos shale, my memory of AREX has faded but my general impression is that the Mancos may be an interesting place and is relatively unknown?
    Yorktown owns 25% of co.; have to check the origins of that and who Yorktown is.
    Anyone know Ross Craft or other mgt members. Co. founded in ’02. Big underperformer in ’09.
    I’ll check about, listen to IPAA presentation. What got you AREX in the first place?

  7. 7
    zman Says:

    BSJ – Did you see the AREX comments? If you want to point me in a direction on it that was just my first thoughts, have not yet gone back through the PRs.

    GMXR – looking more and more poised for a short squeeze.

    PQ – looking for a pr either right before or right after new years. Stock recovering form one heck of a slide from the October peak.

  8. 8
    zman Says:

    RMD – I came up with a big blank on mgt there. BSJ asked about them on Monday…just trying to be responsive.

  9. 9
    zman Says:

    WLT – the breakout continues, approaching $76 now (I have $70 and $80 December calls and am close to punting). BTU may very well be my January addition to coal.

  10. 10
    zman Says:

    HAL back to Jerome’s $29.50 level. Tempted to add Januaries on Thursday, after the gas number. A little worried it might not be quite as big as the Street is looking for (still will be a monster draw though).

  11. 11
    BirdsofpreyRcool Says:

    milepost — fixed income can be a beautiful thing… expecially at those yields!

    TechTrader out with a 63/35 LONG call for this morning, saying to buy any pullback after the rally at open for a few points into the Fed Rate Decision at 2:15. After Fed, he goes to 50/50 (ie, who knows?)

    HeadTrader and I talking about how the fixed income market just screamed tighter over the last week. Thinking January issuance should be strong (for corporate bonds, not just the US Treasury). That will set up a nice rally in stocks… or, it should, anyway.

  12. 12
    zman Says:

    BEXP approaching $13. Based on the timing of their drill / complete / press release it machine I’d bet they get off one more pr next week. Recall that on Nov. 30 they commented that completion ops would start mid December on the well they released results on on Monday.

  13. 13
    TEXWS6 Says:

    What do you want to know about AREX? Used to drill wells right next to them in West Texas.

  14. 14
    BirdsofpreyRcool Says:

    Talking to some institutional KOG holders this morning. We were all under the impression that there should be an operational update out about NOW. We are all aware that well 9 could be non-economic, but we don’t think it condems 33% of KOG’s FBIR acreage. TWP was out yesterday, with a piece saying the same thing. They (TWP) think a duster at 9 would write about 10% of KOG’s acreage off for the MB… but they had already risk-weighted their model to include only 75% prospective acreage to arrive at their $3.50 NAV.

    However, the shorts have descended on KOG like flies on roadkill. Just took a quick peek at the yahoo msg board on KOG. The pollution on that board speaks to Short Tactics and confirms that KOG is indeed in the crosshairs.

    Personally, I think the stock is still just darn cheap here. But, other Bakken players have left KOG in the dust (for now). AEZ continues to be a wow-ser! With kudos to RMD and wcoaster on that one.

  15. 15
    zman Says:

    BEXP topping $13. Liking my NOG more and more.

  16. 16
    zman Says:

    TEXW – Sounds like Ellenburger verticals, not that exciting. If you have anything on their Mancos plans that would be interesting. They also have some land up north, in BC, not sure if that’s a pre 2011 test though.

  17. 17
    zman Says:

    Crude up a buck pre numbers. That’s up 1.5% being led up by heating oil which is 2.25% higher. People definitely eying the distillate number. Word of caution here, if you don’t get the good distillate number, and given the run we have had in the group but not the commodities, watch out for a quick turn to red.

  18. 18
    zman Says:

    Working up a new Bakken idea today, or Bakken angled idea so I’m around but reading so will be less chatty.

    Oil numbers in 30 minutes. Crude up $1.05 at $71.70

    XNG up 0.6%
    OIH up 1.3% (second day of big out performance for service following XOM)

  19. 19
    zman Says:

    BOP – Re 14. And yet you still have no love for BEXP, lol.

  20. 20
    TEXWS6 Says:

    All I know about is there West Texas stuff (AREX).

  21. 21
    zman Says:

    ZTRADE:

    SWN – Sold all (15) of the December $43 calls for $2, up 28%, with the stock at $44.90. I pre rolled this yesterday to January. I continue to hold the Jan $45s, the December $45s and the common and wanted to be out of these given their size in front of the oil numbers.

  22. 22
    zman Says:

    Thank Tex

    Any news from the Bossier Shale area? Thinking we should see more large Bossier completions in the 4Q update from HK and EOG.

  23. 23
    BirdsofpreyRcool Says:

    z — i leave BEXP and NOG to you… you’ve done a great job there.

  24. 24
    BirdsofpreyRcool Says:

    #23 — given the flat media of the internet, I should add that that was NOT a sarcastic comment. you HAVE done a GREAT job making $$ with those stocks!

  25. 25
    bloodystupidjohnson Says:

    Thanks Z: My interest in AREX was that I read an interview of CEO in the WST.

    Low debt, a stock chart that looks like a ski slope, seemed to be cheap on a cf basis. I don’t own it, I was just curious about your views on it.

  26. 26
    zman Says:

    BOP – now where’s the fun in that? NOG I understand you don’t like the game plan of being a non-operator in the Bakken. But BEXP, other than that price to cash flow multiple being a bit high at about 14x 2010, what’s not to like? Oh and the debt. And the fact that they will likely do another deal in the near future (my guess looking at their spending). See, now there is sarcasm for you. I think it has run enough and will pull back soon. Funny thing about single well press releases. When they are good they do two things: 1) they jazz the stock price and 2) they set the bar higher for the next pr.

    Just talked myself into selling my $10 strikes.

  27. 27
    TEXWS6 Says:

    RE #22:

    Are you speaking about Bossier Shale, or Deep Bossier sand wells?

  28. 28
    zman Says:

    Re 27, Bossier Shale. I keep a tenth of an eyeball on GST for Deep Bossier and if you have a better way to play that I’m all ears.

  29. 29
    zman Says:

    I really promise to be less chatty after the oil numbers and get to work on that new idea. Can you tell I’m out from under the friggin swine flu or what?!

  30. 30
    1520sbroad Says:

    BSJ – saw a property swap deal announced today for PWE – some cardium acreage involved it looks like. Stock got a bump from it.

  31. 31
    TEXWS6 Says:

    IMO, the Bossier Shale will not be one to brag about based off of early time data. I have fracced more of these wells than anyone out there. They are hard to frac, expensive, and don’t IP more than 8MMcfd (Average). This will be one of those plays that makes sense at higher gas prices if you have alot of Haynesville acreage.

  32. 32
    zman Says:

    MLPS dripping higher again, EVEP in the lead, then LINE which is tapping on $26. I’m a double in LINE at 27.20, not counting the 18% yield.

  33. 33
    zman Says:

    Tex- Thanks. I’ll get back to you with some questions after the oil numbers.

  34. 34
    BirdsofpreyRcool Says:

    nice inventory report!

  35. 35
    zman Says:

    EIA Oil Inventory Review:

    Crude just before the release: up $1 at 71.70.

    Crude: down 3.7 mm barrels
    Gasoline: up 0.9 mm barres
    Distillates: down 2.9

    Demand:
    Gasoline: 8.963 mm bpd – solid
    Distillates: 3.792 mm bpd – much improved

    Bullish

  36. 36
    BirdsofpreyRcool Says:

    People are heating their homes… should be good for the natty gas number manana.

  37. 37
    zman Says:

    EIA oil inventory continued..

    Imports were 7.772 mm bopd, that’s probably a record low, definitely a multi year low, will go check, so that’s going to take some importance out of the crude number.

    I hear CNBC isn’t talking oil at all…

  38. 38
    zman Says:

    EIA oil inventory continued..

    Cushing stocks up another 700K barrels, not great for oil but the distillate numbers are going to take the lead on the day.

    HO is up 3%, crude up 2.5%.

    Expect bigger HO demand with next week’s number as people try to refill between storms. Unlike NG, demand has a less linear relationship with cold weather on any given single week.

  39. 39
    zman Says:

    Crude up $2.05 at 72.70

  40. 40
    zman Says:

    Somewhat surprised NG still down 3 cents with HO up 3.5% now and crude up $2.25.

    Nice green day. Don’t mess it up Ben.

  41. 41
    bloodystupidjohnson Says:

    1520s: this is a win/win for both companies. PWE has been selling some properties, (sold heavy oil 1st of Dec) to pay off some its debt. Per their investor day they are planning to drill in the Cardium during the second half of next year. Of course they have to convert to a “regular” corp and out of its trust structure by 2011.

  42. 42
    VTZ Says:

    PWE is a great company… have friends who’ve worked there all seem to be smart, practical guys.

  43. 43
    kyleandy Says:

    z – bot LINE w/u and have had EVEP for long time. now that they’re at about 10% do u see much more potential, as they’re both fully hedged.

  44. 44
    VTZ Says:

    Is anybody adding January gassy exposure?

  45. 45
    zman Says:

    Tex – have you been completing wells in Shelby and Nocogdoches in the Bossier Shale?

    It sounded like EOG had a 15 mm/d from the Bossier down there and will have more results on the 4Q call. CHK talking big down there as well, people talking about 10 Bcfe wells.

  46. 46
    TEXWS6 Says:

    Red River/DeSoto Parish

  47. 47
    zman Says:

    Kyle – I’m holding LINE and cashing the checks. I think they will up the payout small in 2010. I am likely to add some VNR soon, better chance of a payout bump.

    VTZ – On the options side just me that I know of. Added SWN yesterday. Will also add some HAL Jans soon as I come out of the December. Thing trades with a 1 or 2 penny spread which I like and is probably the most NAM gas levered play in service.

  48. 48
    1520sbroad Says:

    41 and 42 – i have owned PWE a long time, used to own PTF. I’d like to see them keep paying down their debt. What do you think they look like a year from now when they have to convert? I have been trying to form an opinion for what they turn into?

  49. 49
    RMD Says:

    TEX, would appreciate any comments on AREX mgt. Color about how they drill wells (cheap &quick vs. methodical vs. science projects), their reputation around the field (good to work for, conservative, cowboys, smart, dumb)…all this helps paint a picture.
    Thanks.

  50. 50
    zman Says:

    Now Howard Dean is saying they should pull the healthcare bill. Wow.

  51. 51
    RMD Says:

    #45 CHK at last presentation said Bossier would probably be their 5th shale play (after Barnett, HS, fayetteville & Marcellus).

  52. 52
    bloodystupidjohnson Says:

    Z: I am old friends with buying cheap stocks that have no catalysts. Just like I am old friends with dead money stocks.

    Buying a stock with out an immediate catalysts is not a bad thing. It means there is no hot money in the stock.

  53. 53
    VTZ Says:

    RE 48: I believe they will be fundamentally the same company although distributable cash will be reduced by ~20-25% because of the tax differences from being a corp rather than a trust. I don’t think it changes their operations one bit.

  54. 54
    zman Says:

    RMD – exactly. By the way, check your email, something of interest.

    BSJ – didn’t mean to imply otherwise.

    RMD – Is CRED one you track? I have them on my screen and now and again, find them interesting, like I do CRZO. I generally get over the interest in a few minutes. Interesting chart too and catalysts in the not to distant future.

  55. 55
    zman Says:

    HAL at $30, needs to break on through or I dump the Decembers and say hello to the Januaries.

  56. 56
    bloodystupidjohnson Says:

    RMD: The interview the CEO said during some of the low price environment they stopped drilling because they they had no lease obligations and paid down debt. I liked that. Said they where not going to drill just to drill. Not playing the Wall Street game, I like that too.

  57. 57
    TEXWS6 Says:

    Re #49:

    They aren’t as quick/cheap as most, but they seem to make better wells in the area that I used to operate in (AREX). All we are talking about is 7500′ air-drilled post-holes.

  58. 58
    zman Says:

    HAL – there’s 30.01

    BSJ – A lot of people did that this past year, most of them had a good bit of debt. BEXP, PQ, PXD all had that game plan. As they have reaccelerated drilling their stocks have moved. I didn’t care for the comment in the presentation about the growth rate, a little disengenous to point out 19% growth over the 3Q numbers when you haven’t been drilling. Why not squawk about the 3% YoY growth your new target gets to you. Oh right, because no one would care. I’d guess that one moves with gas prices pretty well next year until they do something interesting. If I am going to by a little name that’s cheap and not really growing however, I’d rather get paid to wait. Like an MLP, but that’s just me. And some of the MLP’s, like LINE, will have granite wash tests in 2010 which could drive them from that angle.

  59. 59
    zman Says:

    TEX – and in E. Texas sounds like just verticals in the CV. Now mention of taking a shot at Haynesville wells under their acreage.

  60. 60
    bloodystupidjohnson Says:

    1520s: RE PWE – listen to their investor day. They do a real nice job explaning where they are going and how they play to get there. Or listen to 11/1809 Bank of America conf. You will get all the info you need.

    PS: I am a owner of PWE, and have been for a few years. I will add to it on any stock market or company weakness.

  61. 61
    bloodystupidjohnson Says:

    RE 58: Yea Z, but the key was that AREX did NOT have alot of debt, so they really did not need to do this.

  62. 62
    zman Says:

    Jerome’s call on HAL yesterday:

    HAL is re-testing the underside resistance zone of a failed ascending triangle as we speak at about the $29.50 to just under the $30 level, this is a favorite technical spot to “sell into the rally”….a trade thru $30 would reverse HAL back into x’s on the current buy signal and really improve its techniocal picture…

  63. 63
    bloodystupidjohnson Says:

    I want every to know that I am NOT touting AREX. I don’t own it. I just found it interesting. Now PWE or VQ or WLT I own so am might be guilty of touting.

  64. 64
    zman Says:

    BSJ – hear ya on that, got them on the gassy watch list now. I’d also not they have a goodly piece of NGLs in their production mix, so its not just a dry gas play, that helps.

  65. 65
    zman Says:

    And BSJ – thanks for bringing it up, I’d forgotten all about them.

    LINE at 26.05.

    WLL at $68+, no options just common for the moment.

  66. 66
    zman Says:

    ZTRADE:

    WLT – Sold my December $70 contracts for $6.80 (on the mid), up 49%, with the stock at $76.75. I also hold a few worthless $80s.

  67. 67
    zman Says:

    Green not easy watch:

    From the local business rag, Arkansas Business.

    Tight credit markets are to blame for a wind turbine manufacturer’s decision
    to delay – but, so far, not cancel – its plans for a Little Rock plant that
    was projected to employ hundreds.

    Polymarin Composites, a subsidiary of the Dutch company Emergya Wind
    Technologies, has placed on hold its plans to move into a former Levi
    Strauss plant on I-530, Emergya confirmed Wednesday. The Polymarin operation
    was expected to invest $16 million in the area and employ 600 people.

    “It’s mostly that we’re delaying and putting everything on ice right now but
    we have not made a formal decision to completely move out,” said Frank Epps,
    president of EWT Americas Inc. “It’s just that the economy is not where we
    thought it was. The incentive programs have opened up the equity markets,
    but the short term credit or debt markets are hard for developers right
    now.”

    Emergya builds wind energy turbines and turbine components, and, according
    to its Web site, “delivers wind farms on a full turn-key basis” – what Epps
    called “the community wind business.”

    Emergya has not made a formal announcement on its plans, Epps said, but
    added that the company will “be looking to reevaluate our position in three
    to six months.”

  68. 68
    RMD Says:

    BSJ: #56 reminds me of on on-shore MCF.

  69. 69
    bloodystupidjohnson Says:

    RMD: yea he does sort of. Of course there is only one Peak – lol

  70. 70
    RMD Says:

    CRED: not on the nearby radar screen. Wondered if their Calliope gas recovery system was a Big Deal, but never got an answer. See they are doing more in the Bakken and Kansas.

  71. 71
    RMD Says:

    CRED again: 9/17/09 release for the math-challanged: acquired 6,100 gross (5,000 net) acres on the rez (KOG) yielding 30 pot’l drilling locations on 640 acre spacing…my calculator must be broken!

  72. 72
    zman Says:

    RMD – yours is working, theirs is broken. Sounds like they were thinking of the TFS too and 2 wells in each per section (which would be 320s by the way, lol)

  73. 73
    zman Says:

    Sitting on hands watching things drift for a bit. Not thinking of adding much, am watching the rest of the Decembers for exits.

  74. 74
    choices Says:

    Z-nat gas weak this AM seems strange-projected large draw tomorrow?

    Maybe no one believes the projections or maybe just an opportunity-you are betting on SWN so maybe an opportunity?

  75. 75
    zman Says:

    Choices – a little odd but not a lot. I think last week I said look for gas to be capped at $5.50. So while with HO being up you’d expect gas to be up too, it has had a good run in the near term and people are wondering if the NE will get big snow or not this weekend. Also, I think traders may be thinking that the 178 number is a stretch so they are taking some quick profits off the table. Great if we get the number but I do think it is a bit of a stretch.

  76. 76
    zman Says:

    WLL looking out of steam, no near term catalysts, lots of quick profits.

  77. 77
    Popeye Says:

    That EXXON fraq comment has to be bearish.

  78. 78
    isleworth Says:

    XOM says they will back out of XTO deal if antifraccing bill passes

  79. 79
    Nicky Says:

    Afternoon all. Cycles looking for a top late today early tomorrow. Target could be 1122 – 1127 area for spx.

  80. 80
    BirdsofpreyRcool Says:

    That Exxon frac comment makes total sense! If you can’t frac the shale, it doesn’t produce. If you can’t get the shale to produce, why buy XTO?

  81. 81
    BirdsofpreyRcool Says:

    ALSO, the US Govt seems to “have it in” for EXXON. They (Congress) seem to be much more likely to pass an anti-frac bill, if they think it hurts Exxon (rather than just the little domestic guys).

    It’s SO much easier to pass, if you position it as “Exxon polluting the water table.”

  82. 82
    Popeye Says:

    Agreed BOP but it look like it is already costing me money.

  83. 83
    zman Says:

    ZTRADE:

    EOG – Sold the (5) EOG $90 December calls (EOGLR) for $4, up 93%. I hold some worthless $100s as well so this will be a little better than a wash.

  84. 84
    RMD Says:

    Wonder if XOM’s contract specifically includes the ability to back out?

  85. 85
    BirdsofpreyRcool Says:

    oops… sorry, Popeye. The goal here is for everyone to MAKE MONEY. Hate it when that doesn’t work. But, somebody does need to speak out against Stupid Congressional Tricks. Hopefully, sanity rules in the long run… and we all make money.

  86. 86
    zman Says:

    RMD – dunno, wonder what the breakup fee is. Did anyone see what they said exactly? Did they say they’d back out if frac’s are brought under the Clean Water Act or if fracs are banned or what? Fracs not going to be banned, that’s just silly.

  87. 87
    zman Says:

    Where’s a link to the “antifrac” bill?

  88. 88
    zman Says:

    Pass an antifrac bill and you can bet on $20 natural gas.

  89. 89
    BirdsofpreyRcool Says:

    #88 great point.

  90. 90
    BirdsofpreyRcool Says:

    ha! …and SD’s value would soar (as a conventional producer).

  91. 91
    zman Says:

    Re 90 – Better point.

  92. 92
    isleworth Says:

    http://www.oilandgaslawyerblog.com/FRAC%20Act.pdf

  93. 93
    jat Says:

    break up fee is almost a billion

  94. 94
    isleworth Says:

    Bill to Regulate Hydraulic Fracturing of Wells Introduced in Congress June 17, 2009

    By John McFarland on June 17, 2009 10:58 AM

    Four legislators from Colorado, New York and Pennsylvania have introduced a bill making hydraulic fracturing subject to regulation by the Environmental Protection Agency under the Safe Water Drinking Act. Dubbed the Fracturing Responsibility and Awareness of Chemicals Act, or FRAC Act ( FRAC Act.pdf), the bill would amend the Safe Drinking Water Act to require companies to disclose the chemicals they use in their fracturing processes. The press release ( Press Release FRAC Act.pdf) from the legislators states that “It’s time to fix an unfortunate chapter in the Bush administration’s energy policy and close the ‘Halliburton loophole’ that has enabled energy companies to pump enormous amounts of toxins, such as benzene and toluene, into the ground that then jeopardize the quality of our drinking water.” (Benzene and toluene are not additives to frac fluid.)
    An energy lobbying group, Energy in Depth, has denounced the bill as an “unnecessary financial burden” on the industry which could result in more than half of U.S. oil wells and one-third of gas wells being closed, and reduction in natural gas production of up to 245 billion cubic feet per year.

    The FRAC Act appears to be a reaction to the development of shale gas, which requires extensive hydraulic fracturing and is taking place in urbanized areas in Texas, Pennsylvania and New York, and a series of incidents across the country in which underground fresh water appears to have been contaminated by oil and gas operations.
    A house exploded in late 2007 near Cleveland, Ohio after gas seeped into its water well. The Ohio Department of Natural Resources issued a 153-page report blaming a nearby gas well’s faulty casing and hydraulic fracturing for causing the seep.
    In Dimock, Pennsylvania, several drinking water wells have been contaminated with methane, and some have exploded. In February, the Pennsylvania Department of Environmental Protection charged Cabot Oil & Gas with two violations it says caused the contamination.
    After gas contamination showed up in water wells in Garfield County, Colorado, local officials financed a three-year study examining the connection between the contamination and gas wells being drilled by Encana in the area. The study found that gas and wastewater from drilling was making its way into drinking water.
    After an area near Cleburne, Texas, in the Barnett Shale field, experienced 15 minor earthquakes over the last seven months, Cliff Frolich, a geophysicist at the Institue for Geophysics at the University of Texas at Austin, said that it is possible that the eartquakes are related to the Barnett Shale production.
    (For more on these stories, see Pro Publica website.)
    Texas Railroad Commissioner Elizabeth Ames Jones told the Fort Worth Business Press that she will actively oppose the FRAC Act. “Hydraulic fracturing isn’t new technology but proven technology. The proof is in the pudding: we have had no instances of contamination and it has been used for 60 years.”
    It seems to me that several issues are being confused in this debate. The contamination reported in Pennsylvania, Ohio and Colorado may have nothing to do with hydraulic fracturing, but appears more likely to be a result of poor well casing, improper well completions, or unique geology in those areas. It is not clear how disclosure of the chemicals used in hydraulic fracturing, which appears to be the main intent of the FRAC Act, will prevent any contamination caused by the fracturing (although it might allow investigators to determine whether contamination is caused by fracturing). And, finally, it is not clear why disclosure of the chemical content of frac fluid would reduce drilling activity. Nor does the proposed law necessarily require federal regulatory intrusion into the industry. Where the Safe Drinking Water Act does apply, the EPA generally delegates authority for implementing regulations to enforce the act to state agencies who already regulate the oil and gas industry. It may be that the real outcry against the FRAC Act is its requirement to disclose proprietary information – the chemical content of the frac fluid.

  95. 95
    zman Says:

    If XOM is talking about the proposed bill referred to in 92 than I find it highly unlikely they’d actually bust the deal. That doesn’t prohibit fraccing. Sheesh, thought you guys were talking about some new muey loco bill I hadn’t heard of. Thanks for the link Isle.

  96. 96
    zman Says:

    LINE just keeps rolling.

    Starting to see some profit taking in some of the recent big risers, GMXR red, WLL flat.

    $10KP II back to 62% cash.

  97. 97
    jat Says:

    on a tangential note, I’m reading now that XTO execs have given up a lot of the change in control cash payout premiums that they were entitled too. smooths the way for a deal, dampens furor

  98. 98
    BirdsofpreyRcool Says:

    Putting frac approval under the EPA changes everything.

    By the way, I used to work with Cliff Frolich… he’s a good guy… but his specialty is studying the behavior of small burrowing animals to predict earthquakes. Not saying he isn’t on to something there… but, let’s just say that Cliff has a VERY open mind. 🙂

  99. 99
    zman Says:

    Frac fear not hitting the shaley plays outside of XTO today. RRC, SWN, UPL etc doing well.

  100. 100
    zman Says:

    Walking through EIA numbers. Bet we see better demand from distillates again next week. Was down 7% to year ago levels this week, people are being stingy and the trucks are rolling less true but they will still need to restock for heat.

  101. 101
    zman Says:

    NOG suddenly jumping.

  102. 102
    zman Says:

    The answer to my question the other day about how many of those giant red balloons that represent 1 ton of carbon would be filled by the Copenhagen conference has been answered. 40,500. The same amount a medium sized city in France produces in a day.

  103. 103
    zman Says:

    RMD – can you run traps on that email?

    Eli – can you ask your guy as well?

  104. 104
    zman Says:

    Ram – check your email

  105. 105
    ram Says:

    O.K.

  106. 106
    zman Says:

    Ram – who’s your pick for the takeout contest? The list is here:

    http://zmansenergybrain.com/2009/12/15/tuesday-morning-and-the-eco-numbers-are-unkind/

    and West now has DNR and Reef took SWN

  107. 107
    tomdavis12 Says:

    Z: Barclays top picks for 2010: Integrated Oil – XOM MLP’s – NGLS Nat Gas – STR E&P Large Cap – APA Mid Cap – HK Services & Drilling – IO.

  108. 108
    ram Says:

    Contest – EOG

  109. 109
    zman Says:

    Tom – thanks. IO is a weird pick out of all the service. Hmmm.

    Ram – got it, good pick.

  110. 110
    zman Says:

    My NFX $45s are alive and kicking.

  111. 111
    redjack Says:

    For your afternoon entertainment..
    frac attack
    http://fracattackthemovie.com

  112. 112
    zman Says:

    “subdued inflation trends”

    low rates for “extended period”

  113. 113
    zman Says:

    Redjack – long time no hear! How’s the boat?

  114. 114
    redjack Says:

    svRedJack is fine…high and dry in Virgin Gorda. The captain and firstmate are home for the holidays.

  115. 115
    zman Says:

    ZTRADE:

    NFX – Sold (10, all) the December $45s for $1.50, up 29%, with the stock at $46.38. Will reload with January calls in short order.

  116. 116
    zman Says:

    RJ – Fantastic, congrats on making it through another hurricane season afloat.

  117. 117
    zman Says:

    $10 KP II at 68% cash.

  118. 118
    zman Says:

    $10KP II
    7% of value in the remaining December calls.

    Thank You Exxon.

  119. 119
    zman Says:

    LOL Watch:

    AREX up best on my gassy names list.

  120. 120
    VTZ Says:

    LOL watch:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aha7dayF3enc&pos=9

  121. 121
    VTZ Says:

    Man… I seriously want to puke in my mouth.

  122. 122
    zman Says:

    And guess what group is failing to keep up … again.

    VLO, TSO, SUN, HOC, WNR, ALJ. All red by a penny or two or more. Just can’t get no love.

  123. 123
    zman Says:

    VTZ – Note who else is on the list, not always the good guy.

  124. 124
    zman Says:

    NG estimate now 176 from 178 yesterday. Looks like more people are thinking they might be a bit high on the withdrawal. Don’t get me wrong, you can see numbers like that on big HDDs but they usually come during February when the heating intensity is higher if the HDDs are the same. Even though they are gas-using-population-weighted Heating Degree Days, an HDD in December is not the same as an HDD in February. The February degree day will end up meaning more gas comes out of storage, all other things being equal. Doesn’t matter why, its just true.

  125. 125
    zman Says:

    WLL backing

  126. 126
    zman Says:

    Cash for Caulkers with Bob Villa on CNBC at 5 pm EST. Please tell Bob isn’t the CFC Czar.

  127. 127
    kiaora Says:

    vtz… Which tracks gold better $xau or GDX ?

  128. 128
    zman Says:

    Question for you guys on Think or Swim? How small of an increment can you enter for an option trade in terms of price? 10 cents, fives cents, a penny?

    Is this subject to the price of the option? For instance, could you put in an offer at 3.15 on a stock that is bid 3.10, ask 3.30?

  129. 129
    VTZ Says:

    RE 127 – Both a little different indexes, neither track the commodity super well.

    RE 128 – On Interactive Brokers you can input 3.12 on an option that is bid 3.10 ask 3.30 if you want and I actually often get filled at pennies above the bid rather than increments.

  130. 130
    zman Says:

    Thanks V – I’m getting closer to shifting my trading account.

  131. 131
    BirdsofpreyRcool Says:

    VTZ — can you get a current quote on the EXXI 7.25% preferreds from IB? Think the ticker is EEXXF. thank you!

  132. 132
    VTZ Says:

    Addendum to 129 – Sometimes you don’t get filled until the bid ask spread moves anyways but you can still bid whatever you like.

  133. 133
    VTZ Says:

    On IB you can basically do whatever you want and there’s about a million features I don’t even touch.

  134. 134
    VTZ Says:

    You can enter order limits for options that are based on a function of volatility, share prices, indexes, etc if you want such that a bid will only trigger under certain conditions.

  135. 135
    kiaora Says:

    VTZ- What would I use to chart the movement of gold?

  136. 136
    VTZ Says:

    GLD is fine for charting, I would just never actually buy any.

    BOP – I don’t have corporate bond quotes on my IB sorry.

  137. 137
    zman Says:

    134 = Nice. Can you chart option values like a stock?

  138. 138
    BirdsofpreyRcool Says:

    VTZ — thanks for checking. If anyone out there sees a current quote on EEXXF, would love to know. Thx.

  139. 139
    zman Says:

    Tomorrow we have:

    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)

  140. 140
    VTZ Says:

    You can trend basically anything.

    http://www.interactivebrokers.com/en/software/tws/twsguide.htm

  141. 141
    zman Says:

    And V – can you chart the greeks?

  142. 142
    zman Says:

    V – thanks much, will mess around with that tonight.

  143. 143
    VTZ Says:

    That I’m not sure… I’m on webtrader right now but I could check when I get home.

  144. 144
    VTZ Says:

    Ultra low commissions too and no I don’t work for IB, haha.

  145. 145
    zman Says:

    Beerthirty

  146. 146
    elijahwc Says:

    #131 EEXXF = 101.625 bid vs common at 1.90

    Here’s a quick and free workaround:

    https://www.kynex.com/Convertibles/default.asp

    Go to Recent New Convertible Issues, scroll down to EXXI and there you everything on the prior days close, greeks and all.

  147. 147
    BirdsofpreyRcool Says:

    thank you, elija!

    Someday, perhaps you can tell me the deets on how a HF would hedge those converts. With a 7.25% divd and 5 yrs of call protection, wouldn’t think it would be that tough to lever up a decent return.

  148. 148
    choices Says:

    BOP-EEXXF-IB does not list; TDAmer provides quote of101.63, no bids or asks, not traded today, I’m assuming this is the 7.25% conv pfd included in the recent deal.

  149. 149
    BirdsofpreyRcool Says:

    #146 = good website, thx again.

  150. 150
    BirdsofpreyRcool Says:

    choices — corrent. “The Preferred that Tanked the Common.”

    They (EXXI offering memorandum) said it wouldn’t be listed on any exchange, so I am curious how people can get quotes on it w/o calling a trading desk.

  151. 151
    BirdsofpreyRcool Says:

    (sung — roughly — to the tune of “The Cockroach Who Ate Cincinnati”…. an old Dr. Demento fav)

  152. 152
    choices Says:

    BOP-I obtained the quote from TD’s stock research page, as mentioned, no trades today, but average 10-day valume is 42.5k, heh.

  153. 153
    BirdsofpreyRcool Says:

    i’m thinking that if the stock takes a header on any dark news from DJ, i may just try to scoop up some of the preferreds (in addition to the common i already hold). That is what elijah is waiting for… the converts to Go Busted.

  154. 154
    choices Says:

    Good point-TD also lists EEXXF on its streamer so it may be possible to track the quotes-if I remember, I will keep an eye on it-if not, pls remind me.

  155. 155
    BirdsofpreyRcool Says:

    Thanks, choices! If Davy Jones hits, I’ve got my EXXI shares. If Davy Jones comes up empty-handed, I’ll snag some convertible preferreds. That’s the plan, Stan.

  156. 156
    isleworth Says:

    Exxon Can Stop Deal if Drilling Method Is Restricted
    Provision Makes $31 Billion XTO Pact Contingent on Continued Viability of ‘Fracking’ Technique to Extract Gas

    By RUSSELL GOLD-WSJ

    Exxon Mobil Corp. can back out of its $31 billion deal to acquire natural-gas producer XTO Energy Inc. if Congress passes a law requiring stronger federal oversight of a controversial drilling technique.

    The merger agreement contains language allowing Exxon to terminate the deal if lawmakers make hydraulic fracturing, known as fracking, illegal or “commercially impracticable.”

    Fracking is a now-common method that XTO and other natural-gas companies use to produce gas from hard shale-rock formations, which have recently become a major source of natural gas. Water, sand and drilling fluids are pumped into the shale under enormous pressure, creating fractures in the rocks that allow the gas molecules to escape.

    Critics contend the practice can cause pollution, especially to drinking water, a charge the industry rejects.

    A bill in the House and Senate would require the Environmental Protection Agency to regulate fracking under the Safe Drinking Water Act of 1974. It would also require disclosure to the public of the chemicals used in fracking fluid.

    Rep. Ed Markey (D., Mass), chairman of the House Energy and Environment Subcommittee of the Energy and Commerce Committee, said Tuesday he would hold a hearing early next year into Exxon’s acquisition of XTO. Mr. Markey said he plans to look at environmental concerns related to air pollution and water contamination from hydraulic fracturing.

    Exxon, based in Irving, Texas, said it is confident that the XTO acquisition will close in the second quarter. It declined to comment on the deal’s fracking-law language except to say that the merger agreement “contains a number of customary provisions for transactions of this nature.”

    But William F. Hederman, senior vice president of energy policy for Concept Capital, a Washington research group that advises institutional investors, said until the Exxon-XTO merger agreement, he had never seen provisions in a deal about the political risks involving fracking.

    Even so, he said, bad publicity is probably more of a potential problem in the near term than congressional legislation. “We don’t see any serious risk of legislation that would trigger the clause,” he said.

    Industry executives say the language is a sign that the sector is growing increasingly worried about the political backlash against fracking. If companies can’t use the technique to extract gas from shale, the value of XTO and similar companies would plunge and the amount of recoverable gas would drop, they said.

    The push for federal oversight is coming mainly from local communities above the Marcellus Shale, which extends from West Virginia across Pennsylvania and into southern New York.

    “People who live in these communities are concerned and they don’t feel like companies or state regulators are protecting their water,” said Amy Mall, a senior policy analyst with the Natural Resources Defense Council, an environmental-advocacy group.

    The Exxon-XTO merger agreement was filed soon after the deal was announced on Monday, but the fracking provision was buried in the 76-page document and word of it didn’t start to circulate until Wednesday.

    Exxon agreed to acquire XTO, of Fort Worth, Texas, in an all-stock deal. It will also assume $10 billion in debt.

    The acquisition marks a significant turn for Exxon, which had spent the last decade mostly focused on finding and developing overseas projects, especially for oil.

    But in the past few years, many smaller domestic gas companies have perfected the use of fracking to get at gas deposits in Texas, Louisiana, Arkansas, Pennsylvania and elsewhere.

  157. 157
    zman Says:

    Thanks Isle.

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