T.G.I.F.

Posted on by zman

Ecodata Watch:

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - WRES
  5. Odds & Ends

Holdings Watch

  • $10KP II:

    • $15,700
    • 50% Cash
    • The Current Holdings tab is updated.
    • I will update the $10KP tab on Monday.
  • Yesterday's Trades:

    • None

Commodity Watch

Crude oil eased three pennies to close at $73.64 yesterday in sloppy, indifferent trading. This morning crude is trading slightly higher after GDP and I would expect it to mark the move of the S&P or a little better today.


Natural gas fell another $0.09 to close at $5.14 yesterday after the EIA reported a smaller than expected withdrawal from storage (see below). EIA's gas storage withdrawal of 86 Bcf was slightly below the bottom of my broad range but well below the Street, still, not a great surprise as warm weather often causes erratic results and since gas had already sold off on the "Janaury Thaw of 2010" gas managed to end the day down only 8 cents, or what it was down before the report hit. Notably we get the latest figures on natural gas supply (up through November) from the EIA sometime later today. This morning gas is trading up 13 cents on a chillier forecast for the next couple of weeks.

  • Weather Watch: Look for a bigger report next week and definitely in the week after that. February is still a toss up though as the 2 to 3 week views are showing another significant warming trend.

Natural Gas Storage Review


ZComment: A little setback on the surplus chase due to a warm spell. From here, withdrawals are generally seen for between 7 and 14 weeks (average last decade = 10 more weeks of withdrawals) with the majority of the remaining chances for big withdrawals in February. Note in graph G that 4 of the historic scenarios from the past decade still put storage below the 5 year average trough level of just under 1,500 Bcf at the end of March.

  • Over the last decade the remaining withdrawals through season end averaged 1,067 Bcf which would put this year's storage trough at about 1,500 Bcf which is good site better than the trough of 1,651 Bcf in the 2009 season.
  • The high withdrawal award for the decade goes to the 2002/03 season and was 1,689 Bcf ... doubt we get this as that was a freakishly cold period.
  • The low withdrawal for the period came at the tail of the 2001/02 season, was a mere 669 Bcf and would be a disappointment to the market for sure if we saw a repeat of that weather. Also doubt we get that given the current February forecasts.

 


 

Stuff We Care About Today

EXXI 5 for 1 Reverse Split Done

  • Your new reference point is $17.60 (last night's close of $3.52 x 5)

WRES Thinking For 2009 Reserves - One Of The Reserve Reports That I Think Will Have A Shot At Getting Notices This Season

With all the changes to the SEC reserve rules this year, my sense is that reserve reports are going to receive only passing interest from the Street. I think WRES may be a little different since there's was more unfairly challenged by the end of 2008 slide in oil prices than most.  Here's the basic idea:

  • At year end 2007, Warren had 356.4 Bcfe of proved reserves on their books, 93% of it oil.
  • In 2008, oil prices fell out of bed ending the year at $33 and SEC rules at the time required the use of year end pricing for determining reserve economics. As such, they saw the reserves on their books fall a whopping 64% at the end of 2008 with all of the hit coming from oil the oil side.
  • So the 2008 reserve report had only 129.3 Bcfe of proved reserves on the books because the oil, at 33 bucks, wasn't economic. I keep saying "on their books" because this accounting only, and the oil didn't vanish.
  • Looking at the table below, you can see that they have over 50 million barrels booked above $50 per barrel but only 9 mm barrels on the report at $3 oil. 
  • Using the new SEC rule that applies the first calendar day of each month's price for last year averaged to come up with a 2009 oil price we get a price of $61.08. This should yield a substantial bump to WRES' 2009 reserves. 
  • Putting the reserves up against the firms' Total Enterprise Value, it's trading at about $2.24 / Mcfe on the 2008 YE reserves.
  • But if you get back to the 2006 reserve level, you're at about 80 cents / Mcfe (or about $5 per BOE). 
  • And that's before you consider that they tripled their gas reserves from 2006 to 2008.   If you put that in play, you might be talking 70 cent / Mcfe valuation.
  • I'm not saying they will get all of those reserves back with this report but they should get a substantial piece back on the books. This is California oil by the way for all you fans. Seems like it would warrant attention, since after all the oil didn't just vanish.
  • Note also the slide in the stock from the teens (back when it had a lot more reserves booked in 2007) until now. While the plummeting price of oil accounts for much of the fall (in both the stock price and the reserves) the current level would appear to be overdone. WRES has been resting in the mid $2s since we took our initial positions (my average cost is $1.85) and while it may look fully valued on a reserves basis using those 2008 YE levels, it appears less so on a cash flow basis (3.6x 2010 E CFPS and 5.6x TEV /  2010 E EBITDA).
  • I would expect them to report reserves by the end of next month at the latest.

 

 

Odds & Ends

Analyst Watch:

  •  Goldman hikes ME target by $4 to $17, maintains Sell
  •  CNX - upped to Buy at Brean
  • CXPO - Initiated at Stifel at Buy with a $5.50 target

Late Day Addendum:

 

158 thoughts on “T.G.I.F.”

  1. Crude up $1.10 from flat pre GDP.

    NG up 14 cents but will move one way or the other with EIA data today.

    Analyst Watch: PXP upped to $42 from $33, at Goldman but rating still Neutral, nice mixed message there.

  3. ACI getting marked down on their results, seem a bit more cautious in tone that the other coals. They had some production issues a couple of quarters back, not sure of the bobble here but it could be related to their guidance not going up. CC at 11 am EST.

  4. Z — thanks for the head’s up on the EXXI temporary ticker change. Was watching the old ticker not move. Gee… THAT was exciting.

    Hmmm….. 4Q not so bad, eh? The credit markets were showing us that in the Fall. The High Yield Index returned about 58% last year… and most of that in the 2nd half. So, where do we go from here? Where do jobs and taxes and deficits go from here. Those are the canaries in the coalmine. Meanwhile, interest rates stay low on tame inflation (and some would venture to suggest — gasp — deflation! i.e. private sector wages, earnings, and pensions are not headed up; and the “creation” of govt jobs don’t count [as they just take $$ from other parts of the productive economy and shift it — non-efficiently — to public sector jobs]… yuck.)

  5. CCJ – Obama to propose tripling loan guarantees for new nuclear reactors to more than $54 billion, according to administration official.

    CCJ strikes me as the go to name for institutions. Largest producer in the world. Have been doing a good job of bringing Cigar Lake and McArthur River back from the abyss.

    problem (or opportunity) is a busted chart attached to a company seen as a consolidator.

    any thoughts on Uranium pricing and other names in the space.

    NRG, ETR are two of the Utes.

  7. TechTrader calling for 60/40 SHORT as the best day trade today.

    HeadTrader has crawled out from under his rock and is making the call to “buy the pullback today.” He notes that “sentiment swung HUGE [his emphasis] to the short side this week… almost unprecedented… surely this must be a contrarian indicator.”

  8. From a different Tech Trading Desk —
    ————————————-

    Right at this point the down move in the S&P 500 is a perfect “snapshot” of the fall seen in October last year.

    · On the 21st October 2009 the S&P 500 hits a new high in the move before it starts to turn lower. This dynamic takes place at the end of the first month of the new quarter. Between the 21st of October and the 2nd November (8 trading days) we see a fall (High to low) of 71.98 points (1,101.36 to 1,029.38). As with virtually even decent correction since last March once it got 2 consecutive up days off the low of the move an up move re-emerged.

    · On the 19th January, 2010 the S&P 500 hits a new high in the move before it starts to turn lower. This dynamic takes place at the end of the first month of the new quarter. Between the 21st of October and the 2nd November (8 trading days) we see a fall (High to low) of 71.99 points (1,150.45 to 1,078.46).

    · What now? Have we put the low in for the moment? Time will tell but given the track record of other corrections of note from March 2008, a 2 consecutive day up close after a decent fall has been a consistently good indicator that a low has been put in.

  11. EXXID — East Coast BigFoot does not appear to be selling the split… not enough volume on the stock yet, to feel Home Safe… but, nice not to open down, either.

    CRT out with a note this morning “pounding the table” on EXXI here. That might have helped.

  13. EXXID all over the place… where it closes today, is what counts. And there are a few hours between now and close. But, if i was a short in the name, waiting for the reverse split to cover, i would be feeling a little uncomfortable here.

  15. Will be outta the office from around 10 to noon. Yes. Gotta see a man about a horse. On the Rez.

  17. Group showing a little firming action after the initial run, sell off action of morning. Nice to see. Should see more but that EIA 914 report still looms.

    Good hunting BOP!

  19. Spread tightening for EXXID as volume starts to pick up, slow to start probably because the opening trade was so high, that was probably the CEO buying his newly priced shares, lol.

  20. Analyst Watch:

    FST target bumped $3 at Credit Suisse to $28. Stock is below where they announced wells 3 and 4 in the Granite Wash play.

  21. Offshore drillers running this am after the NE results yesterday. Analysts saying Jackup rates overly discounted in the stocks. RIG, DO, ATW, NE, PDS, RDC, ESV all moving well. I continue to hold ATW calls.

  23. Jerome – when you get a chance, I find the NFX chart to be somewhat different than many of the other, more cracked looking E&Ps at the moment. Wondering your quick thoughts there.

    The weekly chart on Energy 21 is pretty interesting looking.

  24. Jerome – also BEXP looking like its time in analyst purgatory is coming to a head. Not saying I’m sticking with that one much beyond the next batch of news in the common but I do plan to keep on trading it, perhaps from both sides as it tends to run one way on news (up) and then retreat with analysts cuts (as it is expensive).

  26. MHR: Nary a day without analyst comment. Capital raise coming.

    “Also, look for an increase in MHR’s Eagle Ford acreage in the near-term to >20K gross acres (50% WI). The current position is ~10K gross acres in Fayette, Lee and Gonzalez Counties, TX and we expect the company’s footprint to expand to other counties.”

    MHR Pritchard Capital Partners Buy – Price Target: $3.50

    Magnum Hunter Resources Corp. (MHR-$2.27) – As we expected, the United States Bankruptcy Court for the Southern District of Ohio, Eastern Division, has confirmed Triad Energy Corp.’s Plan of Reorganization, which ratifies and approves MHR’s Asset Purchase Agreement to acquire substantially all of the assets of Triad. MHR anticipates the closing of the transaction, which was originally executed last October 28 th, to occur prior to February 15 th, 2010. As a result of the acquisitions of Sharon and Triad, MHR will be positioned in three of the most prolific areas of the country, namely the Marcellus and Eagle Ford Shales and the Williston/Bakken in North Dakota. Upcoming events during H1 10 that could be catalysts for the stock are the company’s first horizontal Eagle Ford and Marcellus wells. Also, look for an increase in MHR’s Eagle Ford acreage in the near-term to >20K gross acres (50% WI). The current position is ~10K gross acres in Fayette, Lee and Gonzalez Counties, TX and we expect the company’s footprint to expand to other counties. The Eagle Ford acreage along with ~50K net West Virginia Marcellus acres in Tyler, Pleasants, and Wetzel Counties, are very meaningful positions for a company with a market cap of only $120 MM. Upon closing of the Triad acquisition, MHR will be the most levered company to the Marcellus measured in net acres relative to Enterprise Value. Company also filed an 8K after the close yesterday that stated it got a commitment from its banks for an increase in the borrowing base from $25 MM to $70 MM, which is ~$5 MM higher than we had expected. ‘Buy’ rated, $3.50 price target.

  27. RE: FST — FST is the type of stock one would put on their buy on weakness list. A stock with a nice find in an excellent play that has been hurt by general market weakness.

  29. BSJ – True, but the first wells in the Wash they announced was with the stock around $17 or so so you have to take into account that people have already discounted some further success there.

    Credit Suisse Energy Summit begins Monday. I know NFX is speaking which will be their first presentation in awhile and we may/should get their typical Jan/Feb further update on plays and first official guidance for the coming year. Expecting high single digit / low double digit volume % growth, and for them to talk about the pretty secure nature of the volumes as 5 deepwater developments come onstream over the next 12 months, time for an update on the Bakken, definitely time for 5 to 7 wells in the Granite Wash, maybe time for news from offshore China, offshore Malaysia, and maybe more about their Montana Bakken and Marcellus plans.

  30. Jerome – Thanks. I think the weekly and monthly WRES charts are more telling than the daily but I’ve been holding since last May and am not thinking about the quick trade.

  31. Re:#24 BEXP…still finding support right at that topside trendline, BEXP is leaving a number of buying tails when it dips below $13…the daily now showing a “fry pan” base at support, suggesting at least another attempt at a double top…the upside is difficult to manage as BEXP is way over its P&F price objective on the current buy signal, but no question the trend remains up….it’s hitting a bit of resistace right here at the daily 20 period SMA…

  32. NFX – also one that didn’t come close to filling the XOM for XTO event gap. Toying with $51 now, solidly in the base, near term news should be good.

  33. EXXID – so far so good, drifting up, now 6% higher. Question I can’t tell from my data, is the volume on the charts historically split adjusted?

  35. Coal investing: for those thinking about coal stocks, one of there often overlooked problems is rail transport. You can have the best mine in the world, but if you can’t ship it on a timely fashion, then you are out of luck. Right now there is a surplus of rail capacity, but that won’t always be the case. So when listening to conf calls, or investor confs, keep an ear turned to what the CEO says about the rail transportation and any potential problems in that area.

  36. BSJ – so much capacity in the U.S. has come off line over the last year that right now it is not a problem for at least the next 2 years from what I’m hearing.

  38. RE: #23 NFX…held support yesterday with an intraday “doji cross” and reversed back into X’s with the print thru $51 today…if that long white body candle holds up to the close, that’s a “morning star reversal” at support, very bullish indeed…wow…

  39. EOG maybe starting the turn in its normal 20 point oscillation, lol.

    VTZ – I think the upward move in the dollar today on GDP rising is bogus. The GDP rise is a function of inventories. It’s not anything like what a sane person would call sustainable. Congress has proven that non only can they not can they not cut the deficit but they can’t agree to hold it flat. Without further actual stimulus there will be no job recovery any time soon which is important for political reasons which seem to be what matter most now. With that said, I don’t see rates rising this year as the debt the U.S. continues to rollover on a short term basis would only go up in cost if rates were allowed to move up, further cutting back on the ability to stimulate. So yep, I don’t see the dollar holding.

  40. Because of alot of the new safety and environ regs alot of smaller private appalachian have closed down their mines these the rail problem, at least in the east has eased.

    One area to keep an eye on is the Powder river basin mines. In 2008, ACI did not expand one of their mines because they could not get product to market.

  42. Thanks Jerome – I try to flip through all my watched names on the daily and weekly candle sticks once every two weeks or so and that one looks different than most of them now. Just too much good stuff on the horizon and it’s not expensive by any means. Reminds me of a smaller APC in terms of assets but actually has a bigger shale component.

  43. 15 minutes until the ACI call, stock getting dropped.

    Watching IOC. The snapback will be interesting. Not playing for now.

  44. Morning all.

    Not really trusting this rally this morning. Looks weak to me. As far as the count goes the minis did put in a new low overnight which could count as wave v down. So what we are looking at is either a wave iv bounce or a wave ii. If its the latter it really needs to get going to the upside as we should see a 50 – 61.8% retracement of the fall. This doesn’t look like it has the legs so I am favoring we are in a iv up which is likely to only retrace 23 – 38% of wave 3 down. We have got past 23%, resistance is now at 1097, 1100 and 1107.

    What you thinking re gold VTZ – certainly looks precarious along with the euro?

  45. BSJ – PRB coal prices have not done as well in this environment as I would have thought, more due to the economy than the President I think. Could be a good rally starting there with a move back to more normal generation and more low sulfur coal demanded for blending by all regions of the country.

    BEXP – seeing some chunky buys, 35K, 25K

  47. Nicky – Thanks. So you don’t think this looks the same as the end of October move in the S&P yet. I thinking we’d need to break back to 1104 to get much enthusiasm out of the bulls right now.

    Reef – friends still logging?

  48. RE 39: You know I don’t see this dollar rally as anything more than a bear market rally.

    One interesting issue the US is going to have to face is the fact that they need to roll over 5 trillion of short term debt in the next 2 years (!!!). The only way they can do that is higher rates.

    Agree that the GDP number is bogus and along with the employment numbers it goes to show that the recovery is not real, only stimulus.

    Also, it goes to show that having strong banks with tonnes of $$ sitting there, not being lent out is not constructive for the economy. So the fact that the banks are making a killing based on 0% borrowing and paying out huge bonuses has nothing to do with an improved state of the economy.

  49. Z: as you know, alot of the east coast plants now have installed scrubbers, so high sulfur is not much as a problem as in the past. CNX does a good job of highlighting this. So, and this is just a thought, I wonder if the CNX high sulfur/high BTU coal is not starting to make a dent in that trend toward low sulfur/low BTU powder river basin coal? Just a thought. This of course would be very bullish for CNX if true.

  50. Z – well as you know my preference is that the market is not done with the upside. But I think we see a bigger correction that we have seen so far. I am thinking that the indices will test their 200dma with an intervening bounce. So likely imo we see 1030 spx. That said we have had nothing yet which looks like a wave ii bounce and its due, maybe after one more low.

  51. Another thing about coal stock, it is so easy for them to miss earnings or production estimates. Not getting a long wall installed, a train derailment closing down key track, water problem at the mine can all cause trouble. It has been experience that MEE is a post boy for missing estimates. Underground mines are more prone to these problems than surface mines.

  52. Yeah Nick RE 44: it does look precarious. It’a banging against 1075 now which is really the bottom of support until 1034 at which point I don’t think it can fall any further.

    I still stand by my call that I don’t think there’s any way that gold falls below 1000 again. There is a fair bit of resistance in the dollar at 83 if it manages to make it that high. That would also imply that the euro is WAY back down which I think is a stretch because Greece as a % of Euro GDP is miniscule. California (and other states) are practically in the same state of affairs and would have a much bigger impact. Soon people will realize this.

    Have a look at these formations:
    http://www.financialsense.com/fsu/editorials/brochert/2010/0128.html

    From my perspective, I can’t sell down here at resistance (was willing to sell a bit above 1150) and I think the only money coming out is momo money that will come back in so I’ll wait it out.

    I do think it’s probably that gold finds support either here or at 1034 and then moves to make new highs again.

    Limited downside risk.

  53. Thanks VTZ re #48. I totally agree with you. That said it still looks like gold wants to ‘correct’ some more.

    You heard the murmerings that the Chinese may revalue the Yuan? That would be very bearish for the dollar and bullish metals.

  54. VTZ – yes re 52. Interestingly 1030 is the area I am looking at for SPX and gold and SPX are currently moving almost perfectly in step. I think Gold may get there but as with SPX we should see a bounce first. Maybe just back to 1100 – 1120.

  55. BSJ – I don’t know, but agree that would be bullish. As I understand it, ESPs, scrubbers, baghouses, all help the coal fired plant get to its required level of emissions of SOx, NOx, other particulates, and potentially mercury if required at some point. Blending of the coals is also used to get high btu but also high sulfur content coal down which in combination with the washing gets each plant where it needs to be to avoid EAP penalties. Looking at coal shipments over the past 52 weeks I don’t see PRB really suffering vs it’s competition in the east with:

    PBR – Wyoming – down 9.3%
    Appalachia – down 11.3%

    I thought the idea that a good portion (don’t have a number but it sounds significant) of CNX’ coal is interchangeable with met coal which is getting 4x the price per ton was the big swing on the name at present.

  57. Listening ACI call.

    ROSE only name noticeably weak that would be odd to see that way on a day like this. Last several of these have been reversed in short order. I continue to hold the shares and the $22.50 calls.

  59. RE 54: I agree that we probably see a bounce here in S&P because we are oversold but if they don’t manage to make a new high that would be a death kiss for a drop.

    To be honest, I still wouldn’t be surprised to see a retest of 666 at some point, the only reason we might not is because the dollar is getting so devalued that by pricing the S&P in dollars, in nominal terms the drop might not get to 666 but in real terms it could fall below.

  61. R #59 – I think we retest the lows of 666 and more but likely the drop will not start until next year.

  62. Okay if we are on our way to new lows for SPX in this wave then look for support at 1073, 1066 and 1061.

  63. Z: remember you have to sort of filter out Central appalachia coal (less btu and less sulfur) from the northern appalachia coal of CNX (higher btu and more sulfur). Central appalachia also has more problems with poorer quality mines (coal seams) and hill top mining. Some people think that central appalachia coal mining is dying out. I don’t know if I would go that far. These problems do not apply to CNX, which has higher BTU coal.

    You might want to go back to 2008, and check on CNX interchangeablity with met coal. 2008, because that was the last time met coal went crazy in pricing. See how they are doing this time with that time.

  64. Jerome:

    Do you follow the Mcllelan Oscillator? Every time the market has been oversold on an intermediate term, it tends to bottom at around -75. It predicted the bottoms in mid March 09 and early Nov 09 quite accurately. It is currently predicting that a short term rally is imminent at these levels.

  65. coal notes: from aci comments

    2009: 59 mm tons exported total from U.S.

    2010: probably 69 mm tons exports, of the increase, probably 6 -7 mm tons

  66. Re 51 and 63: Z I meant to say, on your comparison, you might want to see how northern app compares with central app. Its too bad that english is my first language — lol or I would have an excuse on my inarticulate posts – lol

  68. Z: refresh my memory, what port is ACI using? Is it New Orleans? Do they have any plans in using a west coast port?

  69. #58-IMHO it is not a fraud, however I believe that Mulaceck’s desire to keep operations and control makes the probability of an LNG JV partner in the near-term remote. Removing that catalyst from the stock and presto, a 20% P/S decline.

  71. BSJ – a little tricky to do, EIA at least breaks out data for WV by north/south but not PA where they are big. W Virginia saw northern production fall 5% last 52 weeks, southern fall 13.3%. More in a bit….

  72. 68. East coast port for export, don’t know name, no capacity constraint.

    Re west coast: they shipped 2 boats to china last year, nothing on the near term horizon but they are thinking about doing more.

  74. Natural gas numbers out. Not great… again.

    EIA is showing a slight uptick in the lower 48 numbers from October to November, up about 0.12 Bcfgpd. A lot of people were expecting to see something more like a 0.5 Bcfgpd drop. I would tell them this is the well completions filtering through from the large inventory.

    Gas is holding up a dime but starting to react. Could see a $5 test, but so far, getting little notice.

  75. Gold is hanging in there and keeps fighting back above 1075 even with the rising dollar. Who knows if it will hold. Bullion banks are probably selling like mad right now.

  77. At this point I bet we have 3 more reports to get through before we see a significant decline in production.

    Gas holding up a dime on the cold weather.

  82. NG – Texas, Oklahomas, New Mexico flat to down a little, Gomex retreating again,

    but

    Wyoming, Louisiana, “other states” (Fayetteville, Marcellus principally) hit a new high for the year.

  83. Those are in fact lousy gas numbers for this report. No more gas adds for me until the market takes this report into account.

  84. Z: Are you a little surprised by the production resiliency considering the decline in rigs for half of ’09?

  85. Tom – I have been for some time, yes. While there may be some issues you can take with the EIA data, the flush production from so many shale wells is offsetting production declines from the much larger but more slow to decline conventional production base. Once we work through the backlog of drilled but not yet completed wells the declines will resume or a better way to say it would be that they will be more visible. However, we are in a cycle where the big shale players are trying to capture leasehold, much of that effort on the gas side will be done mid 2011. If they decide for some reason to accelerate production much beyond the current level by spiking up the rig count than the declines will take all that much longer in showing up.

  87. #86 – the train platform meter was set on cold this morning here in the NYC area. That may be helping a bit.

  88. 1520 – no doubt its helping but the bigger picture just got dealt another blow. I would not be surprised to see some analysts take their gas price decks down next week.

  89. Agreed – i have been rolling my covered positions on nat gas E&P out today, more aggressively now than earlier in the week.

  90. Other thought is we see a marked predilection for oily names again for the very near term over gas, especially unhedged gas.

  91. Jerome, I’d be interested in what you think of sugar (futures or the SGG ETF). It seems to be the only thing going up with the dollar. But I’m thinking it could get dragged down by the rest of the commodity complex.

  92. $BDI off 5% yesterday, $ssec @200dma.

    FWIW:Not sure about all of these intermarket relationships but I have noted in the past that the Baltic “seems” to be correlated to the EURO and of course the EURO has beem weak and is breaking down below 1.39, hence some USD strength, weakness in Baltic Dry Index.

  93. A very unscientific, personal observation – about 4 weeks ago almost my entire portfolio that i sell calls against was in the money. To me this is almost always the sign of some sort of top and that i should take some cash off the table and wait for a new opportunity. Now – everything that was in the money is well out of the money. Typically i begin to panic a bit and roll calls out longer to try and generate more cash. ONe of my resolutions for 2010 was to resist this chicken sh** urge.

  94. The well-balanced, micro-cap, oily portfolio should hold both KOG and EXXI… one is sleep-at-night and growing, the other is Mr. Toad’s Wild Ride with the potential for a Moon Shot and growing.

  95. KOG = no debt + fully-funded 2010 + operationally have their nose to the gridstone

    EXXI = scads of debt + fully funded 2010 + operations in the everyday and the moonshot (but not overly-weighted toward spending on the moonshot)

  97. OK — I know #94 & 95 weren’t very “value-add”… but, I can’t say much more, at this point. Not to imply that I know “inside info” or anything… just can’t lay out details today. Next week, we can discuss in more detail. Thanks.

  100. ANR at $42 now. Just watching the group for entries.

    Also watching WLL peel back, looking for more oil exposure (and less gas for a bit) starting next week.

  101. Yeah I wish there was an ETF to play a rising rig count. Oh wait, there is, and you just named its components.

  104. BOP: After reading the reports on EXXI that you had , I came up with a few questions. If MMR is looking at 10-12 wells @ 100 -150M per plus production facilities, where will EXXI’s share come from? Having lived through Aubrey and ’08 I know what it feels like for the top dog to be too aggressive. I assume no add on legacy oil fields (Devon) would be looked at until the flow test results. Would they partner up or dilute working interest if cash was not available? I know insiders have 5% and skin in the game but what is your psychological assessment of Jim Bob. Speaking to NE yesterday their insurance deductibles in some places have gone up 150%. Does EXXI’s insurance coverage seem enough for a poor hurricane season?

  105. Tom — great questions, all. From what I am told, MMR is planning on spending about $1B on DJ over the next 2 yrs or so. $800mm to be allocated to drilling + 200mm to build the facilities to house 500 Bcf. So, to reiterate, $1B will be spent before a single hydrocarbon molecule hits the market. EXXI’s part will be $160mm of that. Some will come from cash flow, some from reloading of some debt, another equity raise (probably), or selling down some of their interest in the ultra-deep program. Thing is, I trust Schiller to come up with the combo that makes equity the most $$ here. Having to raise $$ for a proven discovery holding 4-9Bs is a high-class problem.

  107. Biggest risk out there is still the broad market. Appetite came into the group quickly this morning, and then evaporated as fast with the rollover in the S&P.

  108. BOP: What I saw was ’10 CF of 209M and capex of 90M so 119M would be available for debt reduction. I am mildly concerned that their balance sheet will not allow much additional spending. Thanks for your responce.

  109. Also, I think Schiller and Moffett have a very good working relationship. I don’t think JimBob will do anything to drive his partners off the cliff. (reef, you have any thoughts here???) But, there is always that chance, yes. And if it got to that, i am sure EXXI would be able to sell down some of their WI. Would hate to see that, but I still file it under “High Class Problem to Have,” from where we sit right now (having already spend the Davy Jones wildcat bucks, any sell-down would be pure return on capital).

  110. Tom — most intellegent people shy away from balance sheets like EXXI. How many interviews with portfolio managers do you hear where they say “we only look at companies with clean balance sheets.” That phrase is music to my ears. Gives me less competition.

    Having a balance sheet like EXXI’s is like running with knives. If it works, you get where you want to go faster… if you trip, it can end badly.

  112. How does running with knives get you anywhere faster? Oh, because people scatter out of your way?

  113. Should have said, it allows you to run, when others (companies with no debt) have to walk… but you are running with knives. The ones without debt can get there too, but it’s a slower process.

  114. Dman — think of it this way. You want to buy a Big House. You can either

    1) save up for years and plunk down 100% equity, or

    2) save up a 20% down payment, and take out an 80% mortgage.

    Both ways, you end up living in a Big House. But, you get there faster, if you take out a mortgage. The caveat (knife) is that you have to make the mortgage payment every month. Or the bank takes the keys to your house.

  116. BOP – if you run fast enough, I guess you could hold the knife out in front & it will slice the air like a needle-nose aircraft 🙂

    KOG blithely ignoring the market today.

  117. Skimo – the big news won’t be the quarter, maybe they have core and log data from the last 400 foot section of Davy Jones. MMR would have a press release out first if that’s the case.

  119. Not sure we will hear anything astonishing from EXXI on Monday… I thought they would announce their 5 for 1 today, effective Monday… but they beat me (and the whispers) by one day.

    However, there could be something out of MMR about Davy Jones. They drilled further and have logged another section, since the last release.

  122. Just noticed that KOG looks quite freaky on intraday timescales (1, 5, or 15 minutes). Very little volatility, but gentle swings. Almost as if everyone trading it is sitting in the same room, with same info. Hmmm.

  123. #91, Sugar ETF, SGG…SGG broke out of a huge consolidation triangle extending from late Aug 2009 until the breakout in early dec of 2009…SGG looks now like it may be rounding a bit here after the incredible run-up, however, from here, SGG remains on its current P&F buy signal until a print of $79…

  125. Z/BOP thanks

    BOP 114 You forgot the 3rd option- go buy a house you could never afford and have BHO/Reid/Pelosi/Frank get the rest of us to pay the mortgage for you.-Ha! but sad too.

  126. Speaking of “small worlds,” who picked RRC and who picked PXP in the M&A Game??

    Hearing some burbling rumors about those two. Of course, heard XOM was going to buy XTO about 2 yrs before it happened to… so rumors can be right, but timing is a tougher call.

    BP picks up RRC, maybe??

  127. Z – yesterday I decided to ignore the weirdness of the split for options & bought some calls on EXXI. So now I have the re-adjusted calls, with no quotes offered (so helpfully my broker values them at zero) & no calls seem to exist on EXXID. My options fell into a crack in the time-money continuum! Hope I can fish them out next week.

  128. skimo — #125 i am trying very hard to forget about that option… i hope it is a one-time thing. Like the govt screwing rule of law and the bondholders in Chrysler and GM. Hope never to see that again, either.

  129. There was an M&A story yesterday that mentioned both of those along with DVN and HK and a few others, it did not seem like a very industry savvy piece so I ignored it.

    Bill has PXP, no one has RRC.

  130. BOP 110 Your point is well taken. I just try to overweight the balance sheet and underweight the knife throwers while checking my greed. You get a gold star for EXXI today.

  131. Dman — worse comes to worse, you can exercise your calls and sell the stock, simultanously… assuming you’re ahead.

  133. Tom — an awful lot of companies who run with knives, stumble. So, it’s a good strategy to be more careful, when you are looking at companies with leveraged balance sheets. My point is, I don’t ignore them.

    An awful lot of managers get around doing the work by ignoring those companies entirely. Makes for a less efficient market. But, I love less-efficient markets.

  134. 3 cheers for inefficient markets and knife-running execs.

    #131 luckily I took the $2.5’s, so that works if EXXI stays good until March 20.

    SPX breached 1080, which caused a lotta selling. Spike down in crude happened just before the SPX breach. Cause/effect, chicken/egg …. ??

  135. HeadTrader says “same old, same old.” Market selling off on nothing in particular, fwiw.

  136. Not a lot of rhyme/reason to the afternoon action. Going sledding for the first time in recent memory. Used to be an every year thing but now, with climate change, not so much. Sleet poring down is sort of rare this far south anymore.

  137. Ha, HT and me saying the same thing lol, at least I’m in good company in this sea of red. Guess TT wins today. Also, Nicky, nice call earlier on the not feeling it comment about the day’s big early surge.

  138. I seem to recall Nicky once described herself as a dizzy blonde.

    Nice call Dizzy! My all time favorite dizzy blonde technician.

  139. Selling off on technicals… as per the usual driver of the markets.

    I read an article that claims that 60% of trading is computer algorithm. Does that sound right to you folks? Kind of funny/sad if that’s true.

  140. VTZ — if you told me that 85% was computer-driven, I would not be surprised. I know it’s a high number, but don’t know how high.

  141. V – a lot of active managers are closet technicians. So even without the HF algorithms etc, I still think this market would trade very technically, because it is liquidity driven. So the value of everything is prone to wild swings & it’s hard to nail down absolute value. A bit like FX, where nobody really knows what a given pair should trade at. So the technical landscape becomes the only reference point.

    For example, can you give a fundamental argument for any particular gold price?

  143. Yeah I can argue that in order to back all the USD in the world with all the gold in the world or a basket of gold and other hard assets, the gold price needs to be well into the thousands. Especially because countries can’t exactly keep significant $ amounts of reserves in oil for example because it’s not logistically feasible whereas all the gold in the world can fit into an olympic sized swimming pool.

  145. I can also argue that all the paper in the world is fundamentally worth nothing if it’s not backed by assets. Especially when new paper is being created endlessly and at the whim of the govt.

  147. No real favorite… I would prefer a basket of juniors with good management and ones without funding that include hedges/derivatives.

    Still like SLW, ANO, WDO, TNX, OSK. There’s tonnes of good names but you want to be diverse.

  148. V – I accept the idea that gold should be priced high in $$, but just meant that it doesn’t have a well-defined price, give or take, say, 50%. So volatility is natural because no-one knows exactly what it’s worth in $$, even if they agree that it is “a lot”.

  149. All I’m saying is that technicals are a self-fulfilling prophecy.

    It’s amazing how so many people were calling for tops around 1050-1150 when the market was miles away. They forecasted it based on technicals and it became a self-fulfilling prophecy regardless of any of the fundamentals ie increasing unemployment, an economy stuffed with unsustainable stimulus, etc.

  150. Let’s just all set up proprietary trader-boxes and then we can be the most prosperous nation of all, think of all the capital creation!!

  151. Looks like I missed a fun day (ugh).

    I will catch up on my reading; but what smacked energy today ?

    Any news on HK; I noticed it sold hard, and after the close traded below 22 (4pm price was 22.31) ?

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