05
Jan

Tuesday Morning Pause

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Market Sentiment Watch: Thank You Sir, May I Have Another!? Yesterday was a great way to ring in the New Year. This morning equity and commodity futures are pointing to a more flattish open.  Another of the Fed's voices, Duke, spoke out yesterday afternoon on excess slack in the economy keeping inflation in check and allowing for low rates for that extended period yet again. Dollar bulls, that should be fair warning. FOMC minutes come out tomorrow afternoon and if speeches from Ben and his cohorts are an indication, there should be nothing in there to boost the greenback.  I dipped into my cash position yesterday and plan to rebuild cash for the rest of the week as I start to ease out of January call positions. By the way, JP Morgan downgraded several names this morning (including BEXP and EOG), and while I have not seen the note my guess is that it's a valuation piece. Those kind of downgrades often provide a brief one day dip in the stock that is erased with momentum in the general group or news in the name. We shall see.

Ecodata Watch:

  • Factory orders (forecast 0.8%), due out at 10 am EST
  • New car sales (forecast 11.2 mm), we get these as the day goes along. 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - Granite Wash players summary, APC/TXCO, CRED reserves
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $26,600
    • 31% Cash
    • The Holdings Tab Is Updated for current positions and for the $10KP II and ZLT spreadsheets.
  • Yesterday's Trades:

    • SWN – Added (30) SWN February $55 Calls for $0.80 with the stock at $49.50.
    • EOG – Added (5) EOG January $100 Calls as per comments in the post for $2.25 with the stock just under $100.
    • BEXP – Added (20) of the February $17.50 calls (QBJBW) for $0.40 with the stock at $14.90. I hold the January $15s as well but plan to sell them this week. I also hold the common from $7.71. The delta here is about 0.2 so a $1 move to the upside on news, should that happen, would be rewarding. Again, high risk and I don’t expect the stock to get to that strike in the near term but it does not need to for these to work.


Commodity Watch

Crude oil jumped $2.15 to close at $81.51 yesterday on the back of a weaker dollar, cold weather in the U.S. and in Asia, strong eco data in the form of the ISM, and increased tensions in the Middle East. This morning crude is trading off slightly.  I've read a couple of comments overnight that new money is entering the crude market at the tick of the calendar. 

  • Early Read On Oil Inventories:
    • Crude: DOWN 1.0 mm barrels
    • Gasoline: UP 1.0 mm barrels
    • Distillates: DOWN 1.8 mm barrels

Natural gas jumped 5% to close at $5.88 yesterday. It's just really cold, and more importantly, persistently so. This morning gas is trading slightly lower as traders take some profits. Natural gas should not be able to mount much more of a run without showing some big weather related withdrawals from storage and this week's holiday-light report may again prove disappointing before we see a really large withdrawal next week.

  • Imports Watch:
    • LNG was 1.4 Bcfgpd last week, up 0.7 bcfgpd from year ago levels. So still no tsunami.
    • Canada was 7.7 Bcfgpd, down 0.6 Bcfgpd.

Crack Spread Update


Key Takeaways:  Same as last week, watching to see if products will rally beyond the move in crude ... so far no joy there and so I sit and wait.


Stuff We Care About Today


Granite Wash Players

Comments:

  • In case you just wanted to know who the big players here are and what it means in terms of reserve potential relative to their 2008 booked reserves.
  • CHK estimates this is the highest return play in their portfolio.
  • Look for NFX to add another set of 5 wells here with their next operational update which should come around mid month.

Conference Watch:

  • Pritchard Energize Conference (Wednesday through Friday)- List of presentations.
  • Next Week:

    • Goldman Sachs Global Energy Conference.
    • BMO Capital Markets 2010 Unconventional Resource Conference.

 

APC Outbids NFX for TXCO Assets

  • $331 mm ($330 mm for the debt and $1 mm for the equity (ouch)), beats the previous NFX offer of $223 mm.
  • TXCO's reserves at the end of 2008 were 81.7 Bcfe.
  • They also had over 620,000 net acres in the Maverick Basin, and 260,000 acres of this has Eagle Ford potential, giving APC potentially over 440,000 acres with Eagle Ford Shale potential.
  • APC has been drilling wells with IPs up to 6 MMcfepd here, not barn burners by the play's standards but definitely economic given current costs and $5 gas.

CRED Reserve Report

  • This is the first 2009 reserve report I have seen and I only bring it up because at first glance, nothing wild jumps out of the report despite the more lenient reporting rules which have led some, myself included, to speculate that some E&Ps will sprout sudden growth as they book PUDs to their heart's content.
  • Reserve replacement of 121% isn't that out there and while reserves did increase due to an increased booking of Proven Undeveloped Locations, the increase was characterized as "limited".

 

Bet This Comes Public This Year Watch

  • Jones Energy - completed the acquisition of Crusader, now has acreage in the Bakken, Woodford, Granite Wash and other plays.

 

Odds & Ends

Analyst Watch:

  • (CXO), (BEXP), (EOG), (COG) cut to Neutral from Overweight at JP Morgan
     

Interesting Reading Watch:

 

165 Responses to “Tuesday Morning Pause”

  1. 1
    bill Says:

    txco about 4 per mcf..interesting

    from the wsj gom drilling

    http://online.wsj.com/article_email/SB126264987791815617-lMyQjAxMTIwNjAyNTYwNDU5Wj.html

  2. 2
    zman Says:

    Hearing JPM’s gas price for 2010 is $4.74. No wonder at the downgrades. Again, this is canned research this time of year.

    Director of Research: It’s a New Year. We need to generate commissions.

    Joe Alman – I can downgrade some things; they look really expensive based on my low ball price deck.

    DOR – Go to it!

  3. 3
    reefguy Says:

    trade of day: BPZ, down 12% yesterday on good drilling result. Buying at open

  4. 4
    zman Says:

    Reef – thanks for the heads ups as I watch them loosely. Those are very good rates for those wells. Need to get back up on that story. Looks like it was buy the rumor sell the news.

  5. 5
    zman Says:

    Reef – Do you know a Jones Energy (private)? Picked up Crusader. That looks like an IPO waiting to happen.

  6. 6
    zman Says:

    Analyst Watch:

    RBC bumps its target on CHK from $30 to $34, stays Outperform.

    JPM also downgraded a number of names to Underweight: CLR, STR, PETD, XCO

  7. 7
    BirdsofpreyRcool Says:

    Good morning!

    TechTrader still out running around Times Square, I think. Hasn’t been seen since New Year’s Eve.

    HeadTrader sticking with his “buying sell-offs and buying quick sell-offs for a trade.”

    Credit Markets. Wow.

    IG +81 1/4 bps

    HY 100 7/8 pts

    It’s a whole new world in credit.

  8. 8
    JD Says:

    Hearing POT and IPI upgraded by CS but i havent found the note. POT from 106.5 yest to 113 and 115 this morn.

  9. 9
    zman Says:

    Thanks JD, nice play calling there.

    IOC up $2 out of the gate. I will likely just punt those Jan calls near here and wait for a pullback. I did get a note last night that Mitsui has signed a deal with them for a condensate stripping plant.

  10. 10
    zman Says:

    Welcome Back BOP!

  11. 11
    zman Says:

    And BOP, nice move in EXXI while you were out.

  12. 12
    zman Says:

    Re IOC

    Here’s that link sent in by Md last night:

    http://www.thenational.com.pg/?q=node/4716

  13. 13
    zman Says:

    ZTRADE:

    BEXP – Added (10) January $15 calls (QBJAC) for $0.30 with the stock at $14.20, pulling back on a downgrade. The company presents at the Pritchard Energize Conference tomorrow and I would not be surprised to see an operations update out of them either tomorrow or next week.

  14. 14
    tomdavis12 Says:

    Z: Sorry to report Cramer last night recommending E&P space and a love fest with APC.

  15. 15
    zman Says:

    Tom – He’s not always wrong, lol. I saw a part of his NG love fest spread to WPRT.

  16. 16
    RMD Says:

    Z, not going to IPAA as I have an important meeting scheduled at Aspen Highlands and Snowmass then. Slackard!

  17. 17
    zman Says:

    RMD – Thanks. Try to stay on the white stuff between the trees.

  18. 18
    Jerome Blank Says:

    EXXI…I have a $2.62 print, which looks to be a new 1 yr high price, exceeding the print by a few ticks set 10/09

  19. 19
    baylor3217 Says:

    KOG on the move more than it has been in the past

  20. 20
    zman Says:

    Jerome – In PF analysis, what do you do mark a selling point when there is no overhead resistance and the stock is and has been going ballistic. I offer up IOC as an example.

  21. 21
    zman Says:

    Ram – I put the interesting reading link in for you today. 12 guys basically calling for the end of the economic world as we know it. One of them, think it was Biggs, said to buy ammo and canned goods.

  22. 22
    zman Says:

    ANR in full fledged break out mode.

  23. 23
    zman Says:

    And on IOC, I plan to punt very soon on the Jan calls and reload into longer dated ones. Maybe March $100s.

  24. 24
    BirdsofpreyRcool Says:

    z — did you snag a full position on EXXI at $1.90?

  25. 25
    zman Says:

    EOG and other JPM downgraded names doing a good job of beginning to shrug off the Allman ailment. I have seen this before and will not add to EOG today as they can still see some secondary selling there. I only added to the BEXP for a near term recovery because it was off over 6% and that seems excessive in front of news.

  26. 26
    BirdsofpreyRcool Says:

    EXXI — Madison Williams (the old SMH team) out with an update and a $4 PT… which excludes any upside from the deep shelf wells.

  27. 27
    zman Says:

    NOG shrugged off a bit of early profit taking. Will be selling the Jan calls either today or tomorrow as they are close to the money and very sensitive at this point. Ideally, I would sell them on a pop created by news from another player in the space, so far no joy on that effort but I hold some of the Feb $10’s so I will not be unexposed if I punt the near month.

  28. 28
    reefguy Says:

    Jones Energy. AV Jones and his son, a very quiet Billionare. Big investor in Quantum Energy Hedge fund. Crusader deal was bought at the bottom…

  29. 29
    zman Says:

    BOP – Thanks much. Looks like we are getting past “deal hangover 2009” and moving onto “holy cow production growth 2010”

  30. 30
    reefguy Says:

    IOC- expect MS to raise price thius week.

  31. 31
    zman Says:

    Re 24.

    I went in small on the buy in the $2.30s, then went about 9x that buy at $1.90 and am about 1/2 of where I’d like to be.

  32. 32
    ram Says:

    Ammo is where it’s at. Always in short supply. Constant money maker if you’re on top of things.

  33. 33
    reefguy Says:

    z-see BPZ

  34. 34
    BirdsofpreyRcool Says:

    z — #31 thanks for the answer. We all pay more attention when we own something. And, yes. The production growth that will be reported for the March 2010 quarter will be WOW. Glad someone is finally noticing…

  35. 35
    VTZ Says:

    Any thoughts on NBL purchase from SU?

  36. 36
    Jerome Blank Says:

    #20 IOC…WOW…from a P&F perspective, one possibility is to exit at the P&F price objective, but we rocketed right thru that…another strategy is to stay with it until you see a three box reversal, which from here would be a print of $80…the other option would be to set an exit strategy based off the traditional chart…IOC has been faithfully tracking the 20 day daily SMA all the way up since the middle of Sept…depending on time frame, risk tolerance and position size you could wait for IOC to start showing resistance at the 20 SMA but this is a long way down and would be painful to sit thru…

  37. 37
    bill Says:

    exxi in 2010 could be like kog was in 2009

    i wish i bot more at 1.90 as well

    i dont think 4 is unreasonable

  38. 38
    zman Says:

    Was on the phone:

    Reef – You know it takes me a few days to recalibrate on names I don’t follow as closely, lol. Especially when I’m in sell mode which I had planned to be today.

    BOP – thanks for the pushing there, made me $.

    Thanks much Jerome.

    VTZ – I didn’t see it.

  39. 39
    BirdsofpreyRcool Says:

    bill — totally agree with that statement (EXXI is 2010’s KOG). And, yes, $4 is very do-able… and then if any of the Deeps come in… $6 is an easy target. Love the oily upside here.

  40. 40
    zman Says:

    SWN just took out its recent high, trading 51.40+. I will be coming out of the January lower strike $50s soonish.

    IOC – unfortunately I only took 2 calls there. Still they are $70 strikes and at $13.50, I probably should cash them and reload. Will do promptly.

  41. 41
    BirdsofpreyRcool Says:

    EXXI 10s last traded at 93.25. My Dad is a Happy Camper.

  42. 42
    zman Says:

    BOP – yep that sounds about right on the EXXI title for 2010. I still think WRES may be surprising this year amongst the little guys; CPE too if they get their balance sheet squared.

  43. 43
    BirdsofpreyRcool Says:

    That’s the thing with EXXI (and what I missed on BEXP)… once you get your balance sheet straightened up, it becomes a whole different ball game.

  44. 44
    zman Says:

    NFX – moving back up. Lot of these charts look the same. That name is amongst the cheapest of the names that look the same, has a plethora of catalysts both near and far. I would expect an operations update and budget with guidance for 2010 by mid month.

  45. 45
    BirdsofpreyRcool Says:

    And that doesn’t mean paying down all debt… just having a manageable mix. In a rising mrkt, you WANT to own the financially-leveraged guys.

  46. 46
    VTZ Says:

    * To pay Petro-Canada, Suncor America $494 mln

    * Proved reserves estimated at 53 million barrels

    NEW YORK, Jan 5 (Reuters) – Noble Energy Inc (NBL) said it would buy the Rocky Mountains oil and gas assets of Petro-Canada Resources Inc and Suncor Energy America Inc SU.TO for $494 million.

    Noble estimates the total proved reserves to be 53 million barrels of oil equivalent, of which 80 percent are within the Wattenberg field, Noble Energy’s largest onshore U.S. asset.

    The deal, which includes 340,000 net acres, will add about 10 thousand barrels of oil equivalent per day, or 46 million cubic feet of natural gas and 2,500 barrels of liquids, to Noble’s output.

    Noble will add two drilling rigs to its Wattenberg activities this year because of the deal, bringing its drilling activity in the field to eight rigs.

    Including activity on acreage outside Wattenberg, Noble Energy expects to increase net production from the assets to about 20,000 Boe per day by 2012. (Reporting by Matt Daily; Editing by Lisa Von Ahn)

  47. 47
    BirdsofpreyRcool Says:

    wcoaster and RMD… your AEZ continues to scream higher. Heck of a chart!

  48. 48
    zman Says:

    NOG moving to new high at 12.76. Don’t know timing of release but I would not be surprised to hear they have participated in the biggest IP in the Bakken to date in their next update.

  49. 49
    zman Says:

    BOP – I went with NOG instead of the AEZ. Can’t complain but it has not performed as well on the common (hard to do for a higher priced stock). Acreage positions are about the same in size but their’s prime real estate, suburbs, and then their is moose pasture. I think AEZ is suburbs as Bakken acreage goes. NOG’s is in the core and they do use the best of E&P operators (primarily EOG and Samson) to get the job done.

  50. 50
    zman Says:

    Was sent this snippet of the JPM call on BEXP.

    Exploration concentration risk. BEXP’s valuation is largely driven by activity in the Williston Basin. If there is an infrastructure issue that causes a takeaway problem, the stock could underperform the group.

    Exploration upside potential. BEXP has several important catalysts around the
    middle of 2010. The company will test Three Forks/Sanish on the Rough Rider
    acreage and Bakken in Montana. If these results are better than expected, the stock could outperform.

    Wow …. how insightful.

  51. 51
    reefguy Says:

    analyst starts with A N A L

  52. 52
    zman Says:

    Hear ya Reef. And I don’t disagree the thing is over valued on a P/CF basis. Just say that. Don’t try to come up with some Art Cashin like prediction of doom, in this case, that they won’t be able to get oil out of the basin. Not with a new pipe opening soon and a rail line with 60,000 bopd of capacity opened yesterday. Come on dude. Just say it’s overvalued on forward cash flow and needs a breather and your firm needs to gen some commish.

  53. 53
    zman Says:

    LINE – approaching $29. RMD – thanks for getting back to me on my question re MLPs vs and yields. My suspicion was the same: that unit prices would need to fall for the yield to be competitive in a rising rate environment unless the distribution could be raised to offset the delta.

  54. 54
    baylor3217 Says:

    Wrote 2 covered calls on CHK Feb 27s at 2.46.

    This is my first covered call sale and I have a very large CHK position so I’m using this as a learning experience with a guaranteed winner.

  55. 55
    zman Says:

    Good luck Baylor. When I write calls, I generally go out of the money and clip smaller coupons as I generally don’t want to get taken out of my position. But, given that the market is due a pullback, maybe you will have an opportunity to buy them back lower later and still keep the stock.

  56. 56
    zman Says:

    RIG, DO, NE making moves higher last couple of days. ATW has same pattern, but has not made the move. Also has a better long term earnings growth profile. Hmmm.

  57. 57
    zman Says:

    HAL looks to be making a move on $32. I’m likely to raise cash in the $31s and watch the $33s for a bit.

    Getting my list together to raise cash on January calls and maybe one Feb that I’d like to reposition.

  58. 58
    zman Says:

    ZTRADE:

    IOC – Sold my (2) January $70 calls (IOCAN) for $14, up 135%. Will reposition soon.

  59. 59
    VTZ Says:

    baylor – as something to consider… with this amount of time left on the Jans, I would have likely tried to sell out of the money jans with the hope of skimming a premium and still seeing a modest appreciation in the shares.

    As an example, selling the jan 30s would net you 0.33 per share currently and you could still see appreciation in your shares up to 30 without eating into your premium and up to 30.33 without having to look to buy your shares above your call price + the premium.

    Something to think about.

  60. 60
    zman Says:

    Crude, flat all day, eying the market that is in turn eying the rest of the week’s eco data.

    NG down 12 cents now, LOD. Profit taking, saw the short position has grown. Probably some thinking we see gas pull back when the harsh weather ebbs later in January.

  61. 61
    zman Says:

    VTZ – That is how I too look at covered call writing. I’m not looking to book a big gain, just continually looking to reduce my basis.

  62. 62
    VTZ Says:

    I look at it as monthly income generation similar to a yield, you could easily end up yielding about 1% monthly this way to reduce your basis without putting your shares at risk because even if you get called you are seeing a gain.

  63. 63
    zman Says:

    ZTRADE:

    NOG – Sold (40) NOG $12.50 January calls for $0.50 (on the mid), up 91%, with the stock at $12.67. I continue to own the Feb $10s and plan to add to that position soon.

  64. 64
    zman Says:

    Agreed V, agreed.

    Last couple of Ztrades, just raising a little cash. Plan to raise more today and tomorrow. Heck of a run we have had in the 1.5 trading day old New Year.

  65. 65
    baylor3217 Says:

    VTZ – 59 – thanks for the insight. I thought about that, but selling 2 contracts only would yield $66 right? I took a strike that would generate decent cash flow and would have to get to an amount near that top of what it had run to in the last 6 months with the thought it wouldn’t get there again.

    If it did, I’d get the $450 in premium as well as some minor appreciation in my price in the stock if they got called away from me. No?

    Of course I’m giving up any upside should the shares run well beyond 29.50 on those 200 shares, but I’ve been looking to trim my position in CHK anyway.

    Am I thinking about this wrong?

  66. 66
    baylor3217 Says:

    Thoughts on the KOG run today? I’ve been looking to raise a little cash there too, but what is the catalyst? Trading back near 2.40 which would be a high over the last 6-8 weeks.

  67. 67
    zman Says:

    KOG – probably just trading with the group. They should not have any well news to talk about for a little while. They are speaking at the Pritchard conference on Thursday morning though.

  68. 68
    zman Says:

    SWN trading $1 short of its all time high from July of 2008. About to punt my lower strike Jan calls there. My Feb $55s are actually outperforming them now.

  69. 69
    zman Says:

    Ford sales up 23% in December.

    SWN must sell Ford cars now, stock breaking higher. I have an order above market that looks like its going to get taken for my $50s.

  70. 70
    isleworth Says:

    Z – PQ seems to be chugging along……seemingly still in bargain bin. Their December presentation at http://www.petroquest.com/PDFs/November09.pdf looks pretty good to me. Any other catalysts on the horizon?

  71. 71
    baylor3217 Says:

    Z do you have any january 55s in SWN?

  72. 72
    zman Says:

    ZTRADE:

    SWN – Sold (20) SWN $50 January calls (TKQAJ) for $2.40, up 55%, with the stock at 51.75. I continue to hold the January and February $55 calls here and the common.

  73. 73
    VTZ Says:

    Re 65 – Yeah you would only yield $66 but you’re only looking at 10 days of risk as opposed to a month. You could do the same next month at another reasonable strike for another $66 with a similar call/duration to expiration. We should therefore be comparing ~130$ to the 450$ and we also need to consider that I would get $0.50 more appreciation per share should they increase.

    Granted, you are locking in a profit and could indeed buy back those calls on a pullback in the shares. You have chosen a trade that offers more guaranteed income but limits your upside because of the timeline. One other consideration is that should the shares drop moderately, the calls will still hold their value because of the time value until the time erodes them.

  74. 74
    zman Says:

    Baylor – yep, I have 30 of those and 30 of the Feb $55 in SWN, as well as the common.

  75. 75
    baylor3217 Says:

    VTZ Re 73, why do I care what the value of the calls are since I already sold them for $2.45?

    If they go down in value, isn’t that the concern of the person that bought them since I’ve already harvested the $490 in cash for the sale of 2 contracts at $2.45?

  76. 76
    elijahwc Says:

    Cardium Note: note that yesterdays transaction fetched 2X previous valuations. Prices going up for the Bakken Redux! Dundee on BEN
    —————————————–
    $2.70 All Cash Bid From PetroBakken Well Above Expectations

    Details
    Berens concluded its formal strategic review process with an all cash bid from Petrobakken valued at $336 million including $65 million in net debt. The $2.70 per share bid was far above our expectations given our recent target price of $2.10 per share and we are therefore changing our recommendation from BUY to TENDER. Insiders of Beren’s representing 24% of the outstanding shares have agreed to tender to the deal, the transaction is expected to close prior to the end of February 2010.

    Through the transaction, Petrobakken is acquiring 40 net sections of Cardium rights with roughly 100 net locations currently identified.

    Transaction Metrics
    The all cash offer of $2.70 per share from Petrobakken represents a 34% premium to Beren’s latest closing price of $2.03 /share and results in a flowing barrel metric of $83,700/boe/d, far above the 2009 corporate transaction average of $42,000/boe.

    Transaction is Positive for Cardium Players
    Petrobakken is one of the premiere horizontal light oil drillers in western Canada and having the company enter into the Cardium light oil play with the acquisition of Berens is positive for the credibility of the play.
    Given Petrobakken’s considerable access to capital we would expect the company to accelerate its drilling activity in the play and possibly make further Cardium focussed acquisitions.

    Conclusion – Tender
    We recommend shareholders of Berens tender their shares to the deal as we are not expecting any competing bids given 1) the $10 million non completions fee 2) an all cash offer, and 3) the substantial premium offered. In our opinion, management of Berens has done shareholders well in receiving an all cash bid of this magnitude.

  77. 77
    zman Says:

    Isle – They should have 4 of their best Woodford Shale completions to report soon. I say best because like many other shale operators their results have improved markedly with experience. Not sure what they have turning to the right at the moment in the Gulf Coast program but they’ve been more miss than hit down there of late. They probably will show good growth in the Fayetteville as I understand they are getting more than the originally expected number of wells AFE’d by the operators.

  78. 78
    TEXWS6 Says:

    Z,

    quick note, LINE has quite a bit Granite Wash acreage, but it’s operated by a private company in Tulsa (Sampson).

  79. 79
    VTZ Says:

    RE 75 – The price of your shares will fall faster than the price of the calls because of the time value so it makes it hard to sell your shares without also selling the calls (because otherwise you have outstanding risk). If you intend to hold them and eat the losses on the shares until time erodes the calls or they expire, then you’re right that it’s only a problem for the person buying the calls. By selling those calls, you almost need to hold your shares until you are ok with not being covered.

  80. 80
    isleworth Says:

    Z – Tks. Does your forecasted 2010 CFPS for PQ still place them as the cheapest of the group? They really seem to have gotten religion on paying down debt and staying within cash generated…..

  81. 81
    zman Says:

    Tex – thanks, I know, but they act like they don’t have it, or at least its not part of the master plan. Guess that’s their non-operator status not doing the talking. I didn’t put them in my chart because when I listen to them they really ignore it. Is it talked more openly about in the latest presentation?

  82. 82
    Jerome Blank Says:

    With the the “premium” issue somewhat behind it, UNG seems to be tracking futures fairly well right now, which supports the basing pattern contained in the P&F relative strength comparison we discussed yesterday…if you look at a traditonal chart of the front month future from let’s say the middle of November, the patterns and % movement track very closely, it will be interesting to see what happens in 2010…today UNG is performing a bit better than futures on a % basis…I’m also going to continue to watch UNL…

  83. 83
    zman Says:

    Isle – Street is at $2.05 this year vs $2.53 in 2009. That’s due to a lack of activity in the back half of 2009 that yielded falling production. I think the numbers will be rising for ’10 but even at $2.05, that’s 3.3x which is very cheap.

    Looking at them on TEV / EBITDA is probably a bit better (given their debt load) and there you are still down at 4.5x on 2010 numbers which is low-ish.

  84. 84
    zman Says:

    Jerome – the SWN and NFX charts working nicely. Thanks for the read there in recent weeks. Thanks also on that HAL comment yesterday.

  85. 85
    VTZ Says:

    baylor – to correct what I said in 73, the max appreciation would be even higher than $0.50 per share in my scenario because you have limited your profit to 27+2.45 as opposed to the 30+0.33 (for the first month, then again for the second).

  86. 86
    zman Says:

    Reuters story out saying coal mining stocks up on higher natural gas costs. No kidding. ACI, BTU, WLT, ANR, MEE all up another 2 to 4% today. Will put a table in the post to have those multiples at hand. Wow the move WLT has had.

  87. 87
    milepost_43 Says:

    #41…and me……thanks

  88. 88
    zman Says:

    NG down 19 cents. Profit taking. Should put a bit of a governor on the stocks for the rest of the day, I would expect range bound gas until we get some numbers, either way.

  89. 89
    zman Says:

    Accuweather: Cold air locked in:

    The coldest air masses are manufactured over the frozen snowfields of the Arctic. Across that desolate territory, there is little or no effective sunlight from November through January. The snow and ice act in two ways to chill the air. First, any warmth that might exist is radiated into outer space. Second, the snow insulates the air from any ground warmth. Cold waves happen in the United States when the jet stream takes on high amplitude. This dislodges the cold from Arctic regions and forces it to plunge southward.

    The current cold weather pattern will be with us through at least mid-January. It is being caused by a blocking pattern, which is simply two large pressure systems that have stalled over eastern North America. The block has and will continue to force large bodies of cold air over Canada to move southward into the United States. One very cold air mass has already arrived, and it will be followed by another even more impressive blast next week.

    Patterns like this also have a habit of creating snowstorms. When and where those will happen does not become entirely evident until a few days before the event. For now, let’s just say that there is a chance for a significant snowfall from the Plains early to midweek to the East later this week.

  90. 90
    zman Says:

    Thanks for that story Eli.

    Back to 56% cash. Planning to raise more as the week progresses.

  91. 91
    tomdavis12 Says:

    Z: Raymond James top picks for 2010 (13) include ANR, CVX, CXO and NOV

  92. 92
    BirdsofpreyRcool Says:

    OK…. serious discussion… APC/PXP/ME in a deepish well (announced Dec 10th, 20k feet in 7.1k feet of water) that I’m hearing some pretty positive things about. The Lucius prospect in Keathley Canyon. PR said they found 200 ft of pay in the subsalt… have we already discussed this on the board?

    Don’t know if it moves the needle on APC, but should on PXP and ME, me thinks…

  93. 93
    zman Says:

    Thanks Tom. Funny how differently different analysts can see the same company. Concho (CXO) was on the downgrade list at JPM this morning too.

  94. 94
    BirdsofpreyRcool Says:

    milepost — #87 YAY!!

  95. 95
    zman Says:

    BOP – It was mentioned in passing that day in the post. I did not have pre drill reserves on it. Best guess is it is most important to ME.

  96. 96
    tomdavis12 Says:

    Z: Maybe CXO has a refinancing need.

  97. 97
    zman Says:

    EOG down nearly 2% on the downgrade, countering the group’s move higher. Stock feels like it is consolidating in this range between $95 and $102. Would bet on budget and guidance news that pleases sometime this month. Further weakness will prompt me to add a Feb call position.

  98. 98
    baylor3217 Says:

    Is WLT getting into a put buying opportunity? Huge move up the last fee weeks

  99. 99
    zman Says:

    Baylor – Maybe, the move in all the coals has been pretty steep. I’m more likely to buy it back on a pull back than try to pick a top on it.

  100. 100
    BirdsofpreyRcool Says:

    z — #95… thanks. Think we will be hearing more about that well soon.

  101. 101
    baylor3217 Says:

    Oil feels a little toppy to me short term. Seems unlikely demand will pick up much in the near future. Also have a ton of people shut in recently and possible over the next couple of weeks

  102. 102
    bill Says:

    stupid question

    on your site i see this stat

    Delivered by FeedBurner 356 readers

    is that 356 real time views on zman energy brain or something else

  103. 103
    zman Says:

    Bill – That’s people subscribing to get notice of free posts. Of which there are none of late.

  104. 104
    bill Says:

    ty

    gdp had a good well

    this is a name we dont talk too much about

    Anyone in it?

  105. 105
    zman Says:

    ZTRADE:

    BEXP – Bit of a WildZ (higher risk) given the amount of time to expiry.

    Added another (20) BEXP January $15 calls for $0.30 with the stock at $14.20. This brings me to (50) of these with an average cost of about $0.41.

  106. 106
    zman Says:

    The action in EOG now (down $2.45) is what I was talking about in #25.

  107. 107
    andy Says:

    bop – re 41 me too thks

    z – took care of problem

  108. 108
    zman Says:

    Saw that, Thanks A.

  109. 109
    Garyinhou Says:

    Z.. re: 55 and writing calls, w/ clr being pricey, is there perhaps oppty to write covereds on clr for jan/feb pullback? + any gen. thoughts on clr as of late

  110. 110
    zman Says:

    Gary – Re CLR. Big acreage position makes it a takeout target. It is pricey on CF and it doesn’t drill the big kahuna type wells that the core players do. So I’m on the fence there. It also doesn’t trade options as well as some of the others. I own some common higher and think that it goes away in the next couple of years (acquisition). From time to time I write calls on it after a run but in general, I forget to do that. One of my 2010 resolutions is to be more disciplined about that kind of thing.

  111. 111
    reefguy Says:

    why is NG off .26?

  112. 112
    zman Says:

    Reef – I have it off 22 cents now, but it was down more. I have no idea. Profit taking run amok. It was up 5% yesterday, down 4% today. Maybe they are front running the numbers this week. Street is looking for a 153 Bcf withdrawal. Next week’s number should be much larger, over 200 easy.

  113. 113
    VTZ Says:

    With regards to gold/dollar:

    Speculative/Fund net long and Commercial net short dollar positions are now at multi-year highs (!!!).

    Something to watch.

    Gold movement has been constructive as of late and gold has held at my 1090 level and back into more support around 1120-1130.

  114. 114
    zman Says:

    V – I don’t think dollar bulls will have much to be happy about in the FOMC minutes tomorrow. The recovery is tentative, more stimulus and free money is needed to stave off a rollover. At least that’s my guess on what it will say. Three Fed folks in 2 days saying the “extended period of accommodation” mantra and still I hear some market types talking higher rates from the Fed in the near term.

  115. 115
    ram Says:

    Is NOG pinned or what?

  116. 116
    zman Says:

    $10 KP II update: Just over half cash, with just over half of option value now in Feb calls.

  117. 117
    zman Says:

    Ram – No. I would not call that pinned. It has had a decent 2 day rally and hit a new high for this cycle. I’m in Febs only now and am planning to add to that position before they get an operations update out. No idea when that will be but historically they’ve put out something with and before the quarter. It has been quite some time since they had an operations update.

  118. 118
    zman Says:

    Bill – saw that GDP well this am, did not give it much thought and did not read the press release. They present tomorrow at Pritchard, probably worth a listen.

  119. 119
    zman Says:

    BOP – On the subject of cleaning up the balance sheet for a new ball game, AXAS might be of interest. Wow ugly before, not so sure now.

  120. 120
    zman Says:

    Planning to punt the HAL tomorrow. May or may not reload there for now.

  121. 121
    choices Says:

    Welcome back, BOP. EXXI 10’s on IB board, bid 91.25, no ask, last trade @95.5, 6.7 mil vol-my thanks added to all those above-it was an excellent bond trade, something I do not find very often.

  122. 122
    zman Says:

    Really good selection of mid caps and names I don’t play in along with my favs at Pritchard next three days. Some oddball stuff too, going to be interesting.

  123. 123
    BirdsofpreyRcool Says:

    choices, andy, milepost, and all EXXI 10-ers… that was (is) a great trade. They don’t come along very often, but when they do, it’s a lovely thing.

    One regret… I shoulda pounded the table on the EXXI convert preferreds… 7.25% is a heck of a coupon, with about 80% of the upside of owning the stock attached to the income stream. I dropped the ball on that security.

    I’d like to do more income producing investments in 2010, as I think we are in for a year like 2004 (following the run in 2003). So, keep your eyes open and bring all suggestions. We can tackle ’em together.

  124. 124
    choices Says:

    Re: #92
    http://www.anadarko.com/Investor/Pages/NewsReleases/NewsReleases.aspx?release-id=1364381

    map of discovery area:
    http://www.anadarko.com/SiteCollectionDocuments/PDF/LuciusPressReleaseMap.pdf

    PXP and ME up well over 3% today, maybe following the sector.

  125. 125
    BirdsofpreyRcool Says:

    thanks, choices. I am hearing 200 ft of nice oily pay (ignoring the gas sands above) with no oil/water contact. APC lying low on talking about results… trying to put together a little more acreage, perhaps?

  126. 126
    choices Says:

    z-APC seems to be at the center of a lot of favorable news releases-it has had quite a run since Jul 09-also (Heh) Cramer had the CEO on I believe on Monday-do you think it is too pricey now, say for a common trade rather than options-it is not on your gas list of stks-just curious as to your view.

    Thanks.

  127. 127
    bill Says:

    the street.com out with this an hour ago..i almost fell out of my chair as I didnt think anyone knew of them
    ————————————-

    Contango is a wonderful candidate for a long-term options bet. The natural-gas company’s core business is drilling wells — the most lucrative link in the exploration chain. Contango will invest a relatively small sum in hopes of a huge payoff if a well hits. Also, its CEO, Ken Peak, is one of most shareholder-oriented managers I know, because he himself is a huge shareholder.

    A few other positives to mind: Contango’s balance sheet is debt free; it bought back stock last year when natural gas was trading at multiyear lows and, when it recently announced a successful well, shares jumped nearly 8% on the news. At $50 a share, Contango is cheap, even at today’s natural-gas prices. Pick up the July 2010 $55 calls at $1.70 for a bet on management’s continued successes and as one of the best ways to play this commodity.

  128. 128
    zman Says:

    BOP – I would expect them to have the lease blocks around it already. Cat out of bag if they don’t. Don’t know aerial extent of structure from that map and have not seen a pre drill estimate. That far out it would probably need to be over 100 mm BOE to be economic as a standalone as that is truly in the middle of nowhere. Agree on the gas that far out, not really desirable just yet. They could do it as a smaller target with an FPSO but I have not heard that mentioned either. Back in the day I used to track all the deepwater developments and Walker Ridge and Keithly Canyon were no man’s land. Very expensive to develop in that water depth.

  129. 129
    bill Says:

    124

    im not in pxp but i do like them. Ive been burnt by 2 secondary offerings

    anyways, pxp is in the haynesville and actually has a bigger exposure to mmr/exxi plays in davy jones and blackbeard

    they have 10 ng hedges in q4 09 and unhedge on the oil side

    they also exposed to calif oil and could benefit from offshore drilling if the moonbats allow then to drill

  130. 130
    BirdsofpreyRcool Says:

    hmmm… not tough to drill, but expensive (tough) to produce. Wonder what they have found there… they seem to think it’s worth pursuing. FPSO? Do they do that in the GoM?

  131. 131
    zman Says:

    Choices. No, I don’t think it is too expensive for a trade in the common. They simply have a lot going on as they are the amalgam of the old Anadarko plus Western Gas and Kerr McGee. That CEO by the way is one of my favorite E&P heads and I had lunch with him back in the early 2000s. Great guy, huge thinker, done some deals that seemed scary expensive at the time only to be proven quite right, and now part of the Fed of Dallas if memory serves. He was one of the big proponents of U.S. E&Ps going into the deepwater back when that was only in vogue for BP, Texaco, Exxon, etc.

  132. 132
    BirdsofpreyRcool Says:

    bill — so why do so many people (PMs) hate the sound of Jim Flores’ name? Heard you can’t mention him in NY mtgs. Was it buying into the Haynesville at the top and then buying a put option — like, a month or so later — to get out at the bottom? Or, is there something else that makes Mr. Flores persona non grata in the professional investment world…

  133. 133
    zman Says:

    BOP – at least one FPSO has been approved in the Gulf so far. It’s very expensive to drill in the water depth as you are looking at drillship rates (could be $500 to 600 per day) and then you have a spar or something similar to build to produce there. So big target territory only. Get me the structural closure and the part of the pay that’s oil and I’ll ballpark you some reserves. Obviously more important in any case to ME and then PXP given their reserve bases relative to APC’s big reserves.

  134. 134
    zman Says:

    Gotta run to get a kid in the cold. Heck of a day for the second day of the year.

    Would someone please post the API numbers when they come out 30 minutes after the bell? Thx.

  135. 135
    BirdsofpreyRcool Says:

    Don’t know the size of the structure… wonder if they have mentioned it? But, heard all 200′ was oil-stuffed and will be drilling deliniation well downdip, to try to find where the oil/water contact is. Will nose around some more.

  136. 136
    BirdsofpreyRcool Says:

    Would love to see KOG close at 2.40 and EXXI at 2.60. Nice round numbers… would give a good starting place for tomorrow.

  137. 137
    bill Says:

    132

    >so why do so many people (PMs) hate the sound of Jim Flores’ name

    i didnt know that. I dont distrust the guy.

    My perception is he is a wheeler dealer. Sell this, buy that, drill here, drill there

    He has had a number of dry holes in the gom
    Paid top dollar for Haynesville at the top of the market..something like 30,000 an acre.

    Bot back stock in the 50s in 2008 only to reissue it a year later in the teens. When the stock recovered from that shock he did it again when the stock was at 30 and priced the deal at 24. I lost my ass with that move and ditched everything i had

    He got lucky with double puts on oil, ie he hedge 200 % of his oil production at 100 and 55. He cashed out of the 100’s when oil was 35 to 40 giving him about a billion to play around with. He gave all of it to aubrey in q4.

    he only has nice things to say about chk and mmr

    I thought his stock awards and options are excessive.

    my biggest complaint is the 2 equity offerings, dilution

    The haynesville deal is monday morning quarterbacking. It was a good deal when ng was 14. With 20 /20 vision he should of hedge 5 years of production to protect his investment

    i like the unhedge oil exposure and they should have a great 4th qtr.

    They also are in the key mmr exxi plays

  138. 138
    BirdsofpreyRcool Says:

    bill — #137, very thorough response. Thanks. I can feel your pain coming through on that one.

    I never met Mr. Flores personally, but we ran around with a lot of the same people in Houston. When he first moved to town, he did a personal real estate deal that set the town a-buzzing. That sort of stuff makes one stop and go “hmmmmm…” sometimes. From what I hear, he is a humbled man now, and worth taking another chance on. Thing is, if he screws up, he STILL has a ton o’ money… so, I’m not sure I want to trust him. Will have to ponder it a bit more.

    Thank you (very much!) for the back-story there. I remember all the CHK/Haynesville stuff, but didn’t know the stock buybacks/issuance stuff. So, is Flores an Idiot? Or a Savant? He has demonstrated both characteristics over a relatively short time period…

  139. 139
    bill Says:

    >So, is Flores an Idiot? Or a Savant?

    somewhere in the middle, lol maybe compulsive.

    vq presents tomorrow, they just released slides, Like pxp, they have calif oil ops. exposure

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjU2MDl8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

  140. 140
    RMD Says:

    BOP 132: in thelist I posted late Dec. Flores had the largest $ size payout for a change of control clause. I think PXP stays cheap vs. others because he doesn’t control anything and has top-ticked some deals…so I say “I’ll just go play elsewhere”.
    Z 119: my impression is AXAS has lots of acres, but they are scattered about without any control of any blocks, therefore never an operator. Talk of a secondary to sell some of the absorbed MLP investor’s stock. (I have more notes at home but this is what comes to me quickly.)

  141. 141
    zman Says:

    Thanks RMD – the last I heard was just before the last deal. I didn’t have a clear picture of what they would look like post deal so I wanted to listen this week. Agreed re acreage, they are in lots of “big name plays” but I’ll give them a look. Talk about a name that has been disappointing, over and over and over again. Sheeesh.

  142. 142
    bill Says:

    140

    why is control so important? (trying to learn)

    exxi doesnt control davy jones or blackbeard but its will be huge for them if it hits

  143. 143
    elijahwc Says:

    18:31 BEXP Brigham Exploration Announces State 36-1 #1H Bakken Well Produces at Initial Rate of Approximately 3,807 BOEPD -Update-


    18:31 USEG U.S. Energy Corp. Announces Initial Production Rate of Approximately 3,807 BOE/D From the State 36-1 #1H Well

  144. 144
    elijahwc Says:

    More on Cardium valuations: Strikes me that $92,000 per flowing barrel is substantially cheaper than Bakken. = prices just started going up. Z, what is bbl for Bakken? 120m to 140m??? Guess I ought to do this during daylight hours.

    http://www.theglobeandmail.com/globe-investor/petrobakken-acquires-berens-for-light-oil-assets/article1418776/

  145. 145
    zman Says:

    Re 142/144 – I will give that my best shot in the post tomorrow (on baby sitting duty tonight)

    Re 143. Um, note to JP Morgan, you really should check the Catalyst List before you downgrade one of my names, lol.

  146. 146
    elijahwc Says:

    “on baby sitting duty” Best done with a cold one and the Basketball game. Texas minus 70 vs Arkansas tonight. Out of here!

  147. 147
    zman Says:

    Eli – Hog ball is unwatchable. And I root for the longhorns in those matchups anyway, lol.

  148. 148
    BirdsofpreyRcool Says:

    Hook ’em Horns!!

    Why would a flowing barrel of bakken oil be valued higher than shallow gulf production? Both have nasty 1st yr decline curves. Just asking….

  149. 149
    zman Says:

    BOP – Part of it is that its a hotter play so valuation metrics are elevated, a lot of it is the oil/gas mix of the BOE being oilier in the Bakken (in general). Then you have the Bakken well’s longer reserve life to consider, annuity that keeps on giving vs a 4 or 5 year shot straightline fashion to $0. Let’s see what else? P&A liability will be lower, development costs lower, differential should be higher but that is shrinking. How much of a flowing barrel difference are you seeing?

  150. 150
    zman Says:

    Oh yes, and repeatability.

  151. 151
    BirdsofpreyRcool Says:

    well… that’s part of the question… what is currently being paid per flowing barrel for shallow, oily shelf production?…. like EXXI (of course). I think the well lives aren’t all that different.

  152. 152
    zman Says:

    BEXP – one late hours trade over $15.

  153. 153
    zman Says:

    Normal shelf stuff doesn’t have a long tail.

  154. 154
    BirdsofpreyRcool Says:

    how long? 5 yrs? 8 yrs? 15? The funny thing is, in math, the present value of a “perpetuity” doesn’t change all that much after about 10 yrs or so… You see that in bond “duration.” The duration of a 100 yr bond is not much different than the duration of a 30 yr. “Convextity” is different, but not duration. Same thing with wells.

  155. 155
    zman Says:

    A lot of it is 3 to 5 year straight line to 0.

  156. 156
    zman Says:

    Now, you can do workovers and put a series of bumps in the slope of the decline line but that costs extra.

  157. 157
    BirdsofpreyRcool Says:

    Can’t argue with 3 to 5 yrs being short. Thanks for playing along.

  158. 158
    zman Says:

    BOP – I was thinking of gassy Shelf production. Much of it is. Oily? Dunno, haven’t looked.

  159. 159
    BirdsofpreyRcool Says:

    Gassy, I agree with. Oily? I don’t know either. Maybe reef has some insight. I’ll ask him manana.

  160. 160
    bill Says:

    Ice age??

    http://www.accuweather.com/regional-news-story.asp?region=southusnews

  161. 161
    bill Says:

    >Um, note to JP Morgan, lol good one

    bexp and useg should have good day tomorrow

  162. 162
    PackMan Says:

    Baylor 54 covered call sale:

    That one really limits your upside but gives you nice protection for a pullback.

    If you ask me tomorrow, I can give you a couple of alternative ideas (for Jan and for Feb). Like the Feb 31s or 32s.

  163. 163
    PackMan Says:

    Like Z said in 55 !

  164. 164
    zman Says:

    PQ out with an operations update, details in the post.

  165. 165
    zman Says:

    Post should be up in about 45 minutes,

    BEXP bidding around $15 early this morning which would put it at a new high for this cycle and puts the 2008 high, when they hit $18 in focus. That’s probably a bit rich but the well results are hard to argue with. Of note in their new presentation are 7 and 30 day production averages. The last big IP well before this one, the Williston well had an IP of 3,394 BOEpd. I know people decry that peak 24 hour rate. But they do show the 7 day average production on that well at 2,342 BOEpd which is is a very strong result.

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