Monday – Welcome To February + Gas Supply Slide Show & Other Tidbits

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Market Sentiment Watch: Last week had nothing for bulls of any kind to latch onto:

  • Markets deteriorated technically, and political hurdles to the market’s progress, once hurdled, seemed not to matter.
  • GDP came in strong but was not the sort of sustainable strength (an inventory issue vs real demand) that the market needs to see.
  • Oil fell with the equity markets and although crude and product inventories are more in line with historic norms than they have been for a year, there is little in the way of fresh demand in the U.S.
  • On the natural gas front, warm weather yielded an abnormally smallish withdrawal for this week of the year but a more important blow to any bullish sentiment came Friday as the EIA reported another month (data is now through November 2009) with nothing in the way of production declines – See the Monday post for the usual gas supply slide show.  I would expect a number of analysts to trim their 2010 gas price deck as a result.
  • This week all eyes will be on the employment number at week's end and on the technical patterns of the major indexes.

Budget Watch: The Obama Administration released a $3.83 Trillion budget. Notably absent: projected revenues from the cap and trade proposals .... guess they think its not going to pass either. In the words of an Administration official, "The $646 billion revenue projection is no longer in the budget, unlike last year, we do not show an assumed amount of cap- and-trade revenue since the exact nature of the legislation remains in flux,"

The Week Ahead:

  • Monday 2/1: Personal income (Forecast 0.3%), consumer spending (F 0.4%), ISM at 10 am EST (F 56.33%), Construction spending (F -0.4%)
  • Tuesday 2/2: Pending home sales, car sales (F 10.5mm)
  • Wednesday 2/3:  EIA Oil Inventory Report, ADP Employment, ISM non-manufacturing (F 51%)
  • Thursday 2/4: EIA Natural Storage Report, jobless claims (F 455K), Productivity (F 7.3%), factory orders (F 0.2%),
  • Friday 2/5: Non-farm payrolls (F +25K, unemployment rate (F 10%)

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Natural Gas Supply Slide Show
  • Stuff We Care About Today - Earnings Calendar - Week 2, HK reserve and ops update
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $14,200
    • 56% Cash.
  • Friday's Trades: None

Commodity  Watch:

Crude oil fell 2% last week to close at $72.89, its lowest level in 6 weeks. The 12 month crude strip is now trading at $75.72 and looks like this.  This morning crude is trading up 40 cents.

  • Rebel Yell Watch: Shell shut a pipeline and three pumping stations in Nigeria after an attack by the Movement for the Emancipation of the Nigerian Delta (MEND) on Saturday. According to newswires ~ MEND called off a three-month-old ceasefire and threatened to unleash "an all-out assault" on Africa's biggest oil and gas industry.


Natural gas tumbled 11% last week to close at $5.13, a seven week low. The 12 month strip is now trading at $5.61. This morning gas is trading up 16 cents on a colder forecast. I don't see gas breaking back above $5.50 without a major February cold spell.

  • Weather Watch:

    • Week Before Last: 180 HDDs which was warmer than last year and normal and yielded last Thursday's sub par 86 Bcf withdrawal report.
    • Last Week: 217 HDDs vs a prior forecast of 201; 249 last year and 221 normal.
    • This Week's Forecast: 210 HDDs, just short of normal and last year.

Natural Gas Supply Slide Show:  


Key Thoughts:  Data for November 2009 were released last Friday:

  1. Lower 48 marketed gas supply increased for a second month and hit its highest levels since April 2009; not exactly what you want to see having just experienced one of the steepest declines in rig counts in recorded history, a decline that did not immediately being to recover as many do but which no is well on the road after the last several weeks of adds in the shale plays.
  2. Texas continued to slide, falling 0.1 Bcfgpd ... big deal.
  3. Louisiana continued to run strong as expected, rising 0.24 Bcfgpd; state production is up a whopping 33% YoY.
  4. Wyoming ran to a new high which is surprising given the lack of a rebound in activity there.
  5. Nuthshell: Zip, nadda, nothing here for the gas bulls.


Stuff We Care About Today

HK More Than Doubles Reserves, Easily Beats 4Q Guidance, Reaffirms 2010 Guidance, Updates Operations

  • Reserves: 2.75 Tcfe, up 122% from year ago reserves less asset sales. Most people should have been looking for reserves to grow in the 60 to 75% range.  I had been looking for 70% growth.
    • Reserve Replacement was a whopping 220% from the drillbit.
    • These are Netherland Sewell engineered reserves so they're conservative, and in my book not subject to some of the more out there practices some firms will resort to with the SEC changes this year.
    • This puts HK at $3.04/ Mcfe on a TEV to reserves basis, in line with most of its peers, when last week, using 2008 reserves, it would have been ranked well above most of them.
    • Finding and development costs came in at a record low $0.68 / Mcfe (excluding land and seismic) or $0.98 all-in (which is the number I generally look). Under a buck an Mcfe is very strong on an all- in basis.
    • Their R/P extends out to 15.9 years from 12.7 years in the 2008 report.
    • Note that under the old SEC price rules, reserves would have be 3.1 Tcfe due to higher year gas prices relative to the 2009 average gas prices employed above.
  • 4Q Production: 598 MMcfepd beats guidance easily
    • vs 3Q09 production of 512 MMcfepd, up 17%
    • up 81% YoY
    • and guidance of 565 to 575 MMcfepd,
  • 2010 Production Guidance:
    • 1Q set at 615 to 625
    • Full year 2010 remains at 670 to 680 MMcfepd

Operations Update:

Haynesville Shale:

  • Production up 450% to 480 MMcfepd gross at year end
  • 2009 average IP was 17.9 MMcfepd
  • 7.5 Bcfe EUR per well remains the thinking here
  • 17 rigs running between NW LA and SE TX; plans to drill 110 to 120 wells in 2010
  • Spud to spud days fell from 70 in Q1 to 54 in Q4 and is expected to fall to 42 days in 2010
  • They added 400 MMcfepd of takeaway capacity today.
  • Acreage: Now 360 K net.

Lower Bossier Shale

  • First JV well is near completion; plans to spud 1st horizontal well late in 1Q

Eagle Ford Shale

  • 310,000 net acres
  • 22 wells drilled to date with average IP of 9.7 MMcfepd; first 30 days average has increased to 7.2 MMcfepd; first 60 days is 6.0 MMcfepd, which is a good bit stronger than what you'd expect from a typical shale but the Eagle Ford is not typical.
  • 4 rigs running; plans to drill 60 wells in the play in 2010
  • First extended lateral was drilled in December 2009: 5,500 foot with 16 frac stages and an IP of 11.6 MMcfepd, they think it has significantly higher reserves.

Asset Sales: Brokers enlisted for each of the 3 planned asset sales with the process to being immediately.

Conference Call: Today, 9 EST.

Energy Earnings Week 2 - We get a few E&Ps and more service and coals this week. Importantly, 3 of my currently held names report this week.

Odds & Ends

Analyst Watch:

  • RRC - Barclays bumps target $3 to $56, maintains Equal Weight
  • CLR - KPM raises to Neutral
  • NE - FBR raises to Outperform, ups target from $45 to $50.
  • ACI - Jefferies and RBC trimmed their targets slightly after earnings on Friday


152 Responses to “Monday – Welcome To February + Gas Supply Slide Show & Other Tidbits”

  1. 1
    PackMan Says:

    Interesting comments from Jan 25 from mad hedge fund trader re: charles nenner; who also has some bearish comments on Nat Gas …

    ” At the Friday close, technical analyst to the hedge fund stars, Charles Nenner, put out his long awaited sell signal on the S&P 500, with the market’s definitive break of the crucial 1,125 support level. From here you sell into the rallies. The SPX is going to plunge 10-20%, Treasury bond interest rates are going to soar (TBT), and gold (GLD) has peaked out. There are tradable shorts setting up in all three of these markets that will run for the first half of 2010. These calls are the product of Nenner’s proprietary Cycle Analysis System, which he has spent three decades developing, and generates calls of tops and bottoms for every major market in the world. I have diligently analyzed Nenner’s approach for a couple of years now. It appears to consist of multiple overlays’ of traditional technical analysis, some mathematically derived time and momentum indicators, and a dash of Elliot Wave for good measure. The result is reliable enough to make a living, as long as you learn how to read him and don’t bet the ranch (or the windmill?) on any single trade. Nenner sees a trading rally in the dollar setting up which could deliver a strong greenback until May, when we should then re-establish shorts, especially in his favorite, the Australian dollar (FXA). The scientist turned technical analyst argues that major bull markets in wheat, corn, and soybeans will begin this year, sectors for which I am also hugely bullish long term. He sees natural gas (UNG) retesting the old lows at $2.40. Farther out, Nenner sees a new major bear market beginning in 2013 that will take both stocks and bonds to new lows. Nenner has a long career that includes stints at medical school, Merrill Lynch, Rabobank, and ten years as a technical analyst at the noted vampire squid, Goldman Sachs. To learn more about the approach of his firm, the Charles Nenner Research Center in Amsterdam, please visit his site at http://www.charlesnenner.com. To hear my in depth, extended interview with Nenner where he outlines all of his views for 2010, please go to my website by clicking here .”

  2. 2
    PackMan Says:

    Obama budget does not include revenues from Cap & Trade (is it dead ?).

    Instead, it includes revenues from raising our taxes by letting 2001 & 2003 tax cuts expire.

  3. 3
    zman Says:

    Pack – amazing they had $640+ B in revenues in the out years for cap and trade and now that’s out.

    HK – talk about a stock that’s been hit and the news today is better than anyone could have hoped for on reserves and 4Q production. I figured they’d beat. Now the 2010 production guidance looks like a cake walk. Note in the pr they also locked in > 50% of expected volumes with $5.55 floors. Pretty good selling price when you can find and develop it for under a buck.

  4. 4
    1520sbroad Says:

    Z – are you on the HK CC?

  5. 5
    zman Says:

    HK walking through their ops press release now.

  6. 6
    zman Says:

    HK – on the E.F.S. they are calling the PXD well from a week or so ago a significant well, helps to derisk part of their acreage. That was a 17 MMcfgpd dry gas, high pressure well, which would drag up their IP and potential their EUR.

    Red Hawk – 5,000 foot lateral, drilled, will be completed by end of first quarter – this is their oil EFS play.

  7. 7
    zman Says:

    HK – Q&A

    Clear that the tighter choke Haynesville wells will have bigger EURs. Not saying how many wells will be in new pilots.

    IOC with another news blurb out

  8. 8
    zman Says:

    HK – most of their Haynesville acreage will be held by production by 3Q11.

    NG up 21 cents. Somewhat surprising. Bad numbers last week to be sure, but that apparently was largely discounted by the slide into week’s end.

  9. 9
    zman Says:

    CRK on the tape with 25% reserve growth, big yawn in the wake of HK. Strong results on production however and the stock remains interesting. It will also be interesting to see how SWN looks at reserves this year.

    Group marked higher for the open.

    Citi out with favorable comments on HAL, oil service.

  10. 10
    BirdsofpreyRcool Says:

    TechTrader out with a 60/40 LONG trade for day traders today.

    HeadTrader in neutral.

    Personally, need to see some buyers return… not just short covering.

  11. 11
    zman Says:

    TPH comment on the EIA 914 data. “We don’t get it, we don’t believe it”

    Me too. Especially regarding Wyoming numbers but also other states where conventional production should be taking a good hit by now. Looks like EIA’s model is broken to me.

  12. 12
    zman Says:

    BOP – re 10. Hear ya BOP, enthusiasm effectively curbed. HK not breaking $23 on the open is more than a little surprising to me. That’s a big upgrade and if it were someone else I’d say “oh sure” on the reserves but the Haynesville homogeneity is impressive and this is where they are booking the PUDs. Also, they have Netherland Sewell on the engineering so that’s not suspect.

  13. 13
    zman Says:

    HK – Eagle Ford, highly derisked already, 80% prospective, expect it to go higher, plan to go to 6 or 7 rigs early 2011 from the current 4. Thinking is they ramp up the EFS as they are able to slow down in the Haynesville.

  14. 14
    BirdsofpreyRcool Says:

    EXXID trading like it doesn’t know where to price, post 5:1 split. We get their 2FQ10 results out after close tonight, then conf call tomorrow.

    CRT looking for $0.0 in EPS, $63.8mm in EBITDA, 18.8mBOE in avg production, and 29 mBOE in current run-rate production.

  15. 15
    zman Says:

    NFX moving better than the group, again. They speak at Credit Suisse tomorrow. Perhaps we get another ops update with the Granite Wash completions in it before that.

  16. 16
    zman Says:

    BOP – yeah, and everyone wants more Davy data.

  17. 17
    1520sbroad Says:

    I got on the HK call – not a whole lot to complain about in there. Sounded a little like “live within cash flow”. Who else operates in the lower bossier right now? GMXR? Does SWN’s east texas acreage include this idea?

  18. 18
    1520sbroad Says:

    Also sounded like they are going to let EOG report on some of their JV work with HK.

  19. 19
    zman Says:

    1520 – CHK, SWN, EOG, CRK – you name it, lots of folks in the Haynesville have a position south and to the left as well. Just what we need… more gas.

  20. 20
    BirdsofpreyRcool Says:

    What I like about EXXI is that it is still undervalued, totally ignoring Davy Jones. But, agreed, results from DJ is the cherry-on-top of this one.

    Might hear something more from MMR on DJ soon. There might have been another logging run on the next 200ft of down-hole. So far, radio silence. But watching for that…

  21. 21
    1520sbroad Says:

    True… the word was mentioned last week – starts with a D ends with -iscipline

  22. 22
    zman Says:

    1520 – I think the concept is “survive 2010 and 2011 by producing your higher cost conventional peers out of a job”.

    BOP – if there’s bad news at Davy Jones I bet we learn how much of it is in the stock.

  23. 23
    zman Says:

    NG up 26 cents. I guess other people don’t believe the EIA data either. Interesting. The forecast just isn’t that cold, in fact, it’s pretty normal and there is another thaw shaping up in February.

  24. 24
    zman Says:

    Coals popping back up today, very volatile even for an energy group. Am thinking to take WLT calls before the Wednesday release. Almost always a good cal there and the stock has fallen from the low $80s to the mid $60s in the last two weeks as estimates have risen.

  25. 25
    1520sbroad Says:

    ISM data came in above consensus 58.4 vs 55 – may help nat gas to some degree on the industrial demand picture.

  26. 26
    zman Says:

    ISM at 58.4% vs 56.3% estimate. Market yawning at the number.

  27. 27
    zman Says:

    Tesla coming public in small IPO


  28. 28
    zman Says:

    HK – would not giving timing on their call of asset sales, said capex in 2011 will likely be the same whether or not they get the deals done at the prices they want. Analysts wanted to hear more. Given the results I’d tell the analysts to spine up and reiterate all the recent buys and change estimates to meet what the upgraded guidance is hinting at. Don’t wait for them to spoonfeed you the 2010 numbers at a higher rate 1 quarter from now. Sheesh.

  29. 29
    zman Says:

    Anyone see a comment on SWN, stock uncommonly strong this morning. Nearly matching the % move in NG which after the fall gas has had makes some sense for the nearly unhedged name. Still, this market has lacked sense for several weeks now and I would guess someone reiterated the name and I missed it.

  30. 30
    1520sbroad Says:

    I got the sense from HK that data room openings were imminent on asset sales. I suppose once that happens the analyst types will be able to remodel how those assets sales will look? Z – what is your sense on the service/infrastructure unit they are planning to sell out? I recall them mentioning MLP a long while ago but that seems like a long time ago. Is the thinking now just a straight up sale of that set of assets?

  31. 31
    bloodystupidjohnson Says:

    Z: we have talked about this before, but WLT seems to have left the coal range and is now a momo driven market driven name. If one thinks the economy and market is going to do well, then buy WLT, if not then sell or short WLT.

  32. 32
    zman Says:

    BSJ – they are all going to move with some relation to the market, my sense is we are do a bounce and they will have a good call for a quick trade after this pull back.

    1520 – The analysts will just plug the sale numbers into the balance sheet and remove the appropriate amount of production from their models as they occur. I have a strong suspicion that when they sell those assets they don’t lower production guidance to account for it at all. As far as I know they are not planning to punt Hawkfield Services, just the announced assets and their midstream components. Sounds like a sale but they are open to an MLP or a VPP I think at this point.

  33. 33
    zman Says:

    I’ve put in a note to Nicky requesting resistance levels on the S&P. I’d guess we are at an obvious one at the 1085 level since everyone was calling that support last week.

  34. 34
    zman Says:

    Pretty screen, not trusting it, another day of this and I may take some lessor losses on some of the higher strike calls.

  35. 35
    1520sbroad Says:

    #32 – got it.

    I haven’t seen anything on SWN this morning. Good piece of volume for them in the first hour though.

  36. 36
    BirdsofpreyRcool Says:

    z — #22 no doubt.

  37. 37
    bloodystupidjohnson Says:

    RE:32 — Sure they are all going to move with the market, but WLT seems to go up first and the hardest of the coals. Of course I might be biase because I own WLT and not the other coals (except for a small stake in CNX).

  38. 38
    jat Says:

    RBC took down their gas number but reiterated their top picks, think swn was on that.

  39. 39
    zman Says:

    Jat – Thanks re SWN. $6 went to $5.50 for 2010, 2011 stayed at $6.50. Can’t blame them for taking their deck down a touch.

    SWN up 5% now, you’d think they were the ones with the big reserves press release out.

    Crude up a buck, inline with a move up for heating oil.
    NG up 25 cents.

  40. 40
    zman Says:

    President on TV announcing the budget, reiterating that the deficits are not his fault.

  41. 41
    cargocult Says:

    Anyone know what symbol to use for google finance to get a quote on EXXI?

  42. 42
    BirdsofpreyRcool Says:


  43. 43
    bill Says:

    40 lol gettin old

    41 exxid

  44. 44
    bloodystupidjohnson Says:

    Looks like TRGL partnership or takeover take was a typical TRGL operation, just hot air. Today they announced a note deal and 2009 reserve estimates, including the La Garenne conventional well but no news on potential partnership deal or takeover. Stock is down about 1.5 points.

  45. 45
    cargocult Says:

    EXXID doesn’t work for me.

  46. 46
    zman Says:


  47. 47
    isleworth Says:

    Z – any catalysts on the horizon for PQ? What did you make of IOC release?

  48. 48
    cargocult Says:

    That works, thanks. I don’t know why google doesn’t have it yet. Thanks

  49. 49
    zman Says:

    PQ – guidance pr should be pretty soon, checking into whether or not they have any exposure to the ultra-deep Shelf but I’d call that a long shot thought, not a catalyst.

    IOC – more data than the last one, still not the definitive release people want.

  50. 50
    VTZ Says:

    “The budget deficits aren’t my fault”… FOR THE NEXT 20 YEARS?

    The fact that they only forecast 10 years and that it’s still 1 trillion a year 10 years out means:

    a) It’s likely going to be more than 1 trillion 10 years out

    b) There are likely deficits for 20 years, not 10

    c) They are going to have xx trillions of debt that will be refunded at much higher rates

    d) Print away!

  51. 51
    Nicky Says:

    Morning all.

    Resistance on SPX at 1088 and then 1092.

    Cycles looked higher into mid – late today. Then weaker tomorrow into Wednesday then likely another bounce.

    With that my preferred count is that this is only a wave iv with v down still to come. Support at the 1060 area. If this is correct then likely the bounce ends at the 1088 – 1092 region (could already be done as we have come close enough to 1088) and we roll over.

    Alternative is that we are in a wave ii bounce which should stop around 1107 – 1117.

  52. 52
    zman Says:

    HK – could just care less about that release. That’s just odd given the fall we’ve already had and the group action today. You really could not have asked for a better release today. If people wanted data on the EFS oil play they were dreaming. Maybe its just that it didn’t pop enough early to get people on board. Or maybe they wanted an asset sale … that was too much to expect as well since they just haven’t had the process rolling that long. Stock up 1.5% now. I may add some lower strike calls soon.

  53. 53
    zman Says:

    V – yeah, just ugly.

    Thanks much Nicky, very good to have at hand.

  54. 54
    isleworth Says:

    Tks Z. HK stock slow to digest that news, but good opportunity IMHO

  55. 55
    zman Says:

    XOM at 290K acres in the Marcellus. Company has 5.5 mm global unconventional gas acres. So first they went after the LNG market, and now they are getting big in the shales (with the XTO buy and others). Probably good for service names as XOM tends to overpay for things like the drilling and completion of wells, mildly bearish for long term gas prices.

  56. 56
    zman Says:

    Isle – The only other thing I can think of that’s holding the name back here (aside from the not yet done asset deals) might be their comments about doing more pilots on tighter chokes in the Haynesville. This is something they had quit talking about early last year saying it wasn’t necessary. Now they are saying keeping the bottom hole pressure up by choking back the well will ultimately lead to more gas produced from the well. They did not comment on how many of the 2010 crop of wells would be put on restricted choke but analysts might see this as a reason to not expect further production beats as we go forward. Obviously, as you get bigger, the % production growth hurdle gets more difficult to lift. Since HK will likely be the #1 or #2 grower this year and it’s not getting paid a significantly higher multiple for that growth you gotta say what’s the point of growing even faster, when you can stretch it out, get more gas out of the ground for less money increasing your return, something which might actually get noticed.

  57. 57
    zman Says:

    NFX running well now. Again, good chance of news release or one of their @NFX pieces over night as they speak at a conference tomorrow.

    MMR and EXXID moving with group which is moving with the market. How far do I trust this market, probably not as far as I could toss a barrel of oil at the moment. Still, good chance MMR has something for EXXI to talk about re Davy on their call tomorrow morning, EXXID press release should be out sometime post close today.

    Tom won a hat off me on the NE vs ATW bet. I really should have checked the reporting date before I set the end of January as the time frame there, ATW later this week. Congrats on that Tom!

    XOM reporting they expect XTO deal to close in Q2.

  58. 58
    BirdsofpreyRcool Says:

    Rockin’ in the Bakken …

    Got a comment from one of the active, focused Bakken players that there is “NO acreage currently left unleased.” Maybe that means there is no acreage around the core area left (or the parts he is interested in)… don’t know. But he went on to comment that if anyone wants into the play, at this point, it’s going to be via M&A.

  59. 59
    bloodystupidjohnson Says:

    Market: funny you got McClellan oscillator in a buying range, and good RSI (7) readings, but you have every chartist in the world pointing out broken trend lines, neg divergences, a very heavy tape, and sell offs or maybe not advances on good news. Who or what do you believe — lol?

  60. 60
    zman Says:

    BOP – that’s pretty significant. Wondering if XOM wants to deal with tiny KOG (formerly partnered with XTO) or just gobbles them. Also puts the cross hairs on bite size morsels like AEZ, NOG, BEXP, WLL, SM with a bigger meal in NFX and CLR. Maybe COP, XOM, HES, MRO as buyers.

    BSJ – well said.

  61. 61
    Wyoming Says:


    1520, ECA I believe is also deep Bosier, I think at least Tex might be able to expand on any questions.

  62. 62
    bloodystupidjohnson Says:

    RE:59 — I guess Z with all these cross currents is where option traders can make or break a year. Guess right and you can make alot of money, guess wrong and have your head handed too you. Of course one can always just sit out this market. There is no law that says you must bet on every hand.

  63. 63
    RMD Says:

    GST has deep Bossier rights, but management reminds me of Eli’s MHR folks.

  64. 64
    BirdsofpreyRcool Says:

    #60 — Not sure the non-operated guys in the Bakken are as attractive… but, certainly drives the valuation for all the players up.

    As time goes on, they are finding they can get more and more recovery/well due to completion techniques. The most economic well model right now is a 10,000 ft lateral. What remains an argument is how long is each frac-stage? So, a better metric for following well results is not “number of frac’s per well”… but “length of each frac.” Puts it on an apples-to-apples basis, for future reference. Talking to one player, they don’t think you have to squeeze the frac stages any tighter than 350-400 ft.

  65. 65
    zman Says:

    BOP – you mean NOG? Plenty of net acres, no debt.

    BSJ – 10% or less of my total portfolio in options means I don’t think about any particular month making or breaking my year.

  66. 66
    zman Says:

    Market flat lining up 10 points. I’d guess that a loss of momentum if it continues after lunch will lead to selling.

  67. 67
    bloodystupidjohnson Says:

    I am speaking of option traders in general, not particularly you. I probably should have made that clearer in my orginal comment.

  68. 68
    zman Says:

    BOP – BEXP in their latest presentation shows the evolution of smaller frac stages in the lateral starting with:

    7 frac stages in the Ross area in 2007, spaced 715′ apart

    and ending with 28 frac stages at the 350′ distance. That 28 stage well cost $6.3 mm to drill and complete with the frac stages costing $20k apiece. They figure each frac stage adds 35,000 bo (which puts their long later, high # stage wells at 1 mm bo a pop). That’s some pretty good economics if you buy their numbers.

  69. 69
    BirdsofpreyRcool Says:

    BEXP — reported IP rates and even 30-day rates sure seem to be better than anyone else is doing. So, don’t quite get it… as I can’t get a good answer as to why BEXP seems to make such good wells. No one willing to say what they really think… at least to me.

  70. 70
    zman Says:

    NFX still appears to have the most interesting chart in E&P land, at least to me. Followed by ROSE and BEXP which appear to be basing, waiting on news.

    SWN, HK, PXD all appear poised to turn higher but won’t do it without the market as they lack clear cut catalysts in the near term.

    EOG – was saying that looked like it was ready to move in its usual $10 swing fashion, looks to be following through on that today. They announce next week, giving them time for a pre earnings run. Could see a catalytic Bossier Shale well announced by them as well as the usual laundry list of NAM items. I did see a broker note last week that hinted at further improvement in EOG’s North Barnett oil combo play.

  71. 71
    zman Says:

    BOP – Hear ya. Bit of a mystery to me too. Not seeing other rates in Rough Rider like that by other operators.

  72. 72
    bloodystupidjohnson Says:

    Z: what is your view of DVN? It seems to be a company that is doing all the right things. Getting out of the gulf at a decent price. Some nice plays like in Brazil. But, like Roddy Dangerfield, it just does not seem to get any respect.

  73. 73
    zman Says:

    BSJ – I watch it but I’m not the biggest fan. They were all fired up about the deep Tertiary play in the Gomex not six months ago, now they are punting and not exactly at the peak. I guess I don’t get their game plan unless it is to streamline themselves to be sold. I’d APC, APC and EOG ahead of them in my list of goto names, nothing wrong with them just not sure I understand what it is they want to do with the company right now.

  74. 74
    bloodystupidjohnson Says:

    RE: 73 — You know Z you bring up a good point. I do like companies that even the lowest employee can know everyday what is a companies game plan and why they come to work.

  75. 75
    zman Says:

    I would be adding to HK here were it not for trepidation regarding the broad market. Might get a bit more aggressive in the near future but would almost rather buy, in the options account, higher, than here.

  76. 76
    BirdsofpreyRcool Says:

    EXXI — looking at the expectations CRT has for the quarter ending 12/31/09 reported after close today… CRT is actually lower than the Bloomberg estimates. Interesting. Sets up for a potentially volatile response. Especially since EXXI’s conf call doesn’t start until 10 am EST tomorrow. Could be a half hour there, where the mrkt is not sure what to do… On the other hand, MMR could make it even more interesting if they put out results from their latest well-logging run… One thing’s for sure, it won’t be boring.

  77. 77
    elijahwc Says:

    DVN getting respect from Oscar Schafer (O.S.S. capt’l mgmt) in Jan 25 Barrons RoundTable. Will be interesting to see how much respect when the 12/31 filings come out. Oscar’s been a reasonably good event driven stock picker over the years.

  78. 78
    zman Says:

    BOP – or CRT is looking to get beat, inching down consensus in the process. As an analyst it is always easier to come up with positive adjectives on a name when they beat your numbers. Plus, really the numbers should not be that big of deal for the quarter as its a transition period and unless the company gives you the exact ramp of the production returning from hurricane outages you could miss it by 1,000 boepd or several %. I am considering adding more of them to the SEP.

  79. 79
    BirdsofpreyRcool Says:

    #78 — good points. It’s really the 29mBOE/day run rate that I think is a stretch for EXXI right here, right now. I think they hit that number, but not until the end of Feb. That said, I am sure (or, rather, I hope) Duane talks to the company on a fairly regular basis. So, he shouldn’t miss a little thing like when that last 3mBOE/day from the hurricane damage is coming back on.

  80. 80
    BirdsofpreyRcool Says:

    In less than 50 days, Leon Cooperman has doubled his shareholders return on their EXXI investment. THAT is why Mr. Cooperman is worth paying attention too.

    Nice job, Lee!

  81. 81
    reefguy Says:

    EXXI- comments on a short squeeze?

  82. 82
    zman Says:

    Anyone have a link to the Credit Suisse presentations tomorrow.

    Sitting on hands today, volumes ok but not impressive in the group.

  83. 83
    BirdsofpreyRcool Says:

    yeah… “it sucks to be short EXXI today.”

  84. 84
    BirdsofpreyRcool Says:

    Frankly, reef, it sucks to be short anything in the energy sector today. Thanks, in good part, to Mother XOM’s nice earnings report this morning.

  85. 85
    zman Says:

    Re 83 … LOL


    EOG up $4, been awhile. Always, um, amusing how hot and cold the sector runs. Been running cold for 2.5 weeks, due a good bounce.

    S&P at 1087.8, saw someone on CNBC calling for resistance all the way back to 1107, with Najarian saying he won’t buy a bull move unless it breaks above 1,120.

    Reef – I’d like to see MMR moving with the EXXID here, looks to awaiting the new data. Guesstimating we are soon on the Davy data and 3 or so weeks on Hurricane Deep and Blueberry Hill.

  86. 86
    reefguy Says:

    bought more MMR today on that disconnect

  87. 87
    BirdsofpreyRcool Says:

    reef — interesting that MMR is the laggart in the Triumverant of MMR / PXP / EXXI. Looks to be a smart move on your part. Thx for sharing.

  88. 88
    zman Says:

    re 86, good to know. Any comments on IOC’s release … anything there to make you halt your liquidation?

    HK trying to work higher now. Still sitting on hands today. Want to see group/market action tomorrow. I recall many of these one day rallies in periods of broad market uncertainty over the last 24 months. String a whopping two green days together and we’ll talk, lol.

  89. 89
    zman Says:

    Crude up $1.45, not a big shock that it’s tracking the market up, with a bigger % move added due to a weaker dollar and the Nigeria news.

    NG up 30 cents. Pretty surprised.

  90. 90
    Dman Says:

    Z – I gather from Catalyst Watch that there should be some BEXP news soon … (??)

  91. 91
    reefguy Says:

    No test in oil leg means poor reservoir rock. Drilling horizontal to look for some. I think there is eng. execution risk in that procedure further, a catalyst in this stock is months away, I think I can re-enter at lower numbers.

  92. 92
    VTZ Says:

    Gold up 25 is why I couldn’t sell at resistance on Friday.

  93. 93
    zman Says:

    Dman – any day between now and the quarterly release. They should have 3 more wells to report on now. The central Rough Rider well is probably less important than a big lateral, high frac count well over in their older Ross area.

  94. 94
    BirdsofpreyRcool Says:

    Tomorrow is Ground Hog Day. We, in the oil patch, are hoping old Phil sees his shadow and decides to add another layer of sweaters.

  95. 95
    zman Says:

    D – and they may just wait until the Q as they’ll want something to talk about from an ops standpoint on that call. HK, with today’s release has pretty much spilled the beans on anything you might expect on the call. I think it drifts higher but it won’t be something like a big well or group of them that gets that one back to the recent high.

  96. 96
    zman Says:

    BOP – did you see PETA wants to outsource Phil’s job to a robot. Not my PETA mind you, that other. I think mine, People for the Eating of Tasty Animals, would want Phil to keep his job.

  97. 97
    BirdsofpreyRcool Says:

    PETA — those people think eating rutabagas is “fun.” I’d rather they didn’t tell the rest of us what to do.

    Besides, Phil got to bite Mayor Bloomberg (was it?) last year. I think the little booger LIKES his job!

  98. 98
    BirdsofpreyRcool Says:

    You don’t Mess with the Phil. Not even if you’re the Billion Dollar Mayor of NYC. Gotta love that!

  99. 99
    BirdsofpreyRcool Says:

    Nice credit rally, backing up stocks here. Been a coupla weeks since I’ve seen that, fwiw.

  100. 100
    zman Says:

    Pretty big danger that today’s trading is moot, grows in my book as the S&P trades sideways below resistance. Volumes in the E&Ps still ho hum to weak for this time of day.

    VNR – near a new high, that weakness last week didn’t last long. Other MLPs marching back up as well.

    BEXP and NFX strongest names in the Bakken today, only second to CLR which caught an upgrade today. WLL turning on the chart as well, only holding the common there.

  101. 101
    BirdsofpreyRcool Says:

    This came out earlier… so posting a bit late —

    Stocks bounce out of the gate, spurred by earnings (XOM up 2.5% post #s) and eco data (ISM); a benign budget release also helping relieve some fears (actually some pos. news when it comes to taxing foreign corporate profits, which was a big overhang on the tape last week). Volumes a bit on the light side and a lot of the big moves higher today (like materials, energy) coming as a result of short covering. Larger vanillas aren’t doing a whole lot (last week there were selling; today they aren’t selling but also not stepping in to buy). Consensus on the desk is that the market had become oversold and was due for a bounce, but people remain skeptical and cautious of any rally in the very near-term. So far (as of noon) desk isn’t seeing a lot of selling into today’s strength although people aren’t really chasing prices higher.
    Market Sectors – big moves higher in the materials and energy sectors (both up 2.5%+). In the materials, seeing a big bounce in the metals – CLF +7%, AKS +5.8%, FCX +5%, ATI +5%, X +4.5%, ect; a lot of it is covering after a steep decline in this space last week (i.e. X was off ~20% last week) although the robust ISM # and mild dip in the dollar helping. Within energy, XOM is up 2.8% after earnings and giving a big boost to the sector (and the market), although coal stocks are some of the best performing names (MEE +6%, CNX +5.5%, BTU +4%). Financials, tech, industrials are all up 1%+. Within financials, both GS and MS are up ~4% (less worry around the “Volcker Rule” ever becoming law). Tech is enjoying a nice across-the-board rally (semis, hardware, networking, etc), although like most other groups, desk is seeing short covering and absence of vanilla selling for the move (CSCO gave up earlier bounce and is now flattish ahead of earnings Wed). On the downside, the “safe haven” groups are underperforming – health care and staples (although both are still up). Within HC, HUM shares are down >3% after earnings. Within staples, the group is seeing some selling/profit taking as the broader tape rallies (keep in mind this group acted well last week, in large part b/c of PG’s earnings). SP500 Retail index is one of the poorest performing groups in the market, off 0.7%, ahead of same-store-sales this Thurs (although a lot of it is b/c of an 8% decline in AMZN and a 2% fall in M).
    Best Performing SP500 stocks (from Bloomberg): CLF, MEE, CNX, AKS, AMD, ETFC, FCX, NVDA, ATI, DNR
    Weakest performing sp500 stocks (from Bloomberg): AMZN, GCI, NYT, HUM, DFS, THC, PBCT, M, AIG, Q
    Earnings out this morning: EPD, AMG, SOHU, GCI, ONB, STL, HEW, SYY, ACV, CRNT, HUM, XOM
    Commodities: Commodities are stronger across the board today as the ISM number lifts the space. Oil is up 90c, nearing $74. Natural gas is up over 25c to $5.40 after last week’s sharp decline and amid colder weather. Gold is up $12 to $1096, bouncing off a multi-month low. Copper is also up around 1 pct today.
    FX: USD (DXY) is off 0.1% today, but off its lows of the morning. The dollar is off 0.3% to the Euro, but up 0.4% to the Pound and 0.6% to the Yen. The Euro is up 0.9% against the Yen.
    Corp Credit: Corp credit is mostly in line with the tape today as IG spreads narrow 2 bps and HY gains 5/16 of a pt.
    Treasuries: Treasuries sell off across the board today as investors move to put money back into the equities markets. Yields on 2s jumped 5 bps to 86 bps and 10s now yield 3.66 pct. The 2-10 year spread saw a slight steepening to 280 bps today.

  102. 102
    zman Says:

    Crude ending the NYMEX session up 2.14% at $74.45, the third green close for oil since 1/11/10. Notably, crude hit the low from mid December on this pull back and bounced off of it with today’s move.

    NG closed up 6%, or 30 cents.

  103. 103
    zman Says:

    Thanks a lot for 101 BOP, goes along with my thoughts on volumes almost everywhere I look.

  104. 104
    zman Says:

    NFX back to $52, nice, again would like to see more volume on this move but note Friday’s volume, much of which was buying before the market crapped out. Still looking for a credit suisse link to all the presentations over the next several days if anyone has it.

  105. 105
    tomdavis12 Says:

    Z: Sent you CSFB link. Did you receive?

  106. 106
    zman Says:

    EOG back up to $95, would very much doubt you see a press release before earnings next week as they typically keep it to the quarterlies for ops updates.

    Tom – just checked, the link I have didn’t have that conference on it, hmmm.

  107. 107
    zman Says:

    Got these from Tom – will be presenting at the Credit Suisse Energy Summit.

    Feb 01 SD
    Feb 02 AEP, FE, NS, MWE, NFX
    Feb 03 RIG, HAL, APC, WES
    Feb 04 COP, OXY, VLO ME
    Feb 05 BRS, SII, BBG

  108. 108
    zman Says:

    Crude shooting up another 50 cents post close, lots of commodities higher today.

  109. 109
    Nicky Says:

    Looking at how slow it all is I am wondering if we may see an abc rally here which takes up most of the week. If so the b wave down which should happen tomorrow into Wednesday will hold above Friday’s lows.

  110. 110
    zman Says:

    Gotta step out for a meeting, let me know if the EXXI numbers hit.

    Thanks much Nicky. Same move go for crude in your way of thinking?

  111. 111
    Nicky Says:

    Yes Z. Crude may get back to 77.00 area.

  112. 112
    reefguy Says:

    EXXI-$19 bucks looks like a hard target to break

  113. 113
    BirdsofpreyRcool Says:

    $19 bux is exactly a double, from the Dec 15th 2ndary pricing. Not suprised to see supply come out at that level.

  114. 114
    reefguy Says:

    DJ Triad trying to close at HOD…

  115. 115
    BirdsofpreyRcool Says:

    So is HK. Think a few energy shorts got sweaty palms today.

  116. 116
    BirdsofpreyRcool Says:

    reef — i like that… the DJ Triad. thx!

  117. 117
    milepost_43 Says:

    108 maybe…

    Sorry, no link….very long…will post ALL if anyone wants it.

    A Defensive Buildup in the Gulf
    February 1, 2010

    Graphic for Geopolitical Intelligence Report

    By George Friedman

    Therefore, the diplomatic option appears to have dissolved. The Israelis have said they regard February as the decisive month for sanctions, which they have indicated is based on an agreement with the United States. While previous deadlines of various sorts regarding Iran have come and gone, there is really no room after February. If no progress is made on sanctions and no action follows, then the decision has been made by default that a nuclear-armed Iran is acceptable.

  118. 118
    zman Says:

    Good strong close.

    Thanks Nicky.

    Davy Jones Triad – nice.

    BEXP also to present in Vale at Credit Suisse tomorrow.

    Milepost – saw that, probably more spike causing than selling weapons to Taiwan was.

  119. 119
    john11 Says:

    17:46 ET 2/01/10 BEXP Brigham Exploration provides operational update ($13.87)

    BEXP announced that its operated Jackson 35-34 #1H and Owan-Nehring 27-34 #1H produced approximately 3,540 (3,064 Bopd and 2.86 MMcf/d) and 2,513 (2,215 Bopd and 1.79 MMcf/d) barrels of oil equivalent, respectively, from the Bakken formation during their early 24 hour flow back periods. Brigham maintains an approximate 62% working interest in the Jackson and an approximate 49% working interest in the Owan-Nehring.
    The Jackson and the Owan-Nehring were both completed with 30 frac stages, ceramic proppant and perf and plug. Brigham’s 12 long lateral high frac stage Bakken and Three Forks wells have averaged an early peak 24 hour production rate of approximately 2,371 barrels of oil equivalent.
    Thus far, Brigham’s 10 long lateral high frac stage wells in its Rough Rider project area have averaged an early peak 24 hour rate of approximately 2,428 barrels of oil equivalent.
    All five of Brigham’s wells currently fracing / waiting on completion are anticipated to be completed with approximately 30 frac stages.
    BEXP expects to commence its own operated Bakken well during H1 of 2010.; and its own Three Forks test in Rough Rider during H1 of 2010

  120. 120
    john11 Says:

    Link to full BEXP release,

  121. 121
    zman Says:

    Thank John, glad to see them choose sooner over later for that operations update, lol.

  122. 122
    bill Says:

    does exxi report tonight or tomorrow

    how do those bexp numbers look?

  123. 123
    zman Says:

    Bill – hard to complain about those numbers, especially as one of them is a Three Forks completion, will have more deets in the post tomorrow. Stock is bid $14.50+.

  124. 124
    zman Says:

    EXXI should be out later tonight as I understood it.

  125. 125
    BirdsofpreyRcool Says:

    yep — EXXI said the 2FQ09 results will be released “Monday evening.” I wonder whose time zone they were refering to….

  126. 126
    BirdsofpreyRcool Says:

    oops… 2FQ10 (hate the 6/30 fiscal year end)

  127. 127
    zman Says:

    My mistake, neither of those was a Three Forks well, thought it was early on my list to see another, read the opening paragraph wrong on my phone, still good numbers.

  128. 128
    bill Says:


    last week Penn had a lease sale and the day after the gov said he wanted to raise the severance tax. I thought that was pretty underhanded to do that after the lease sale and not before

    anyways, this just in

    In rolling out the Interior Department’s budget request of $12.2 billion for fiscal year (FY) 2011, Secretary Ken Salazar Monday said the department would initiate a rulemaking next year to increase onshore royalty rates for oil and natural gas production on federal land

    producers will be easy pickings

  129. 129
    RobBanks Says:

    Exxi EPS 46 cents

  130. 130
    BirdsofpreyRcool Says:

    EXXI 46 cents… huh? Need to look at that… i would have been happy with breakeven.

    However, as I expected, CRT was waaaaay high on the Jan 2010 run-rate production. CRT thought it would be 29mBOE/d. I guesstimated 26mBOE/d. EXXI reporting 23mBOE/d. But, this will go up by the end of Feb to CRT’s number.

  131. 131
    BirdsofpreyRcool Says:

    OK… the 46c EPS included the $17.8mm of after-tax gain on the retirement of bonds. Without that book gain, after-tax earnings would have been a loss of about $1.4mm.

  132. 132
    zman Says:

    “After being drilled to 28,603 feet, logging and coring operations were completed and drilling has resumed, toward a proposed depth of 29,000 feet”

    Not exactly spilling the beans on what the core and log showed.

  133. 133
    BirdsofpreyRcool Says:

    Reading EXXI further, current production is 26mBOE/d (exactly what I was expecting) with that daily production expected to go over 30mBOE/d following the restoration of the rest of the hurricane-damage, within a month.

    Looks good to me.

  134. 134
    BirdsofpreyRcool Says:

    z — i think EXXI will leave it to MMR to ‘splain the recent core and logging runs.

  135. 135
    zman Says:

    Going to be a lot of questions on the call about it. Where was CRT on quarterly production?

  136. 136
    RobBanks Says:

    Can some post a link – all I have is a streamer saying 46 cents.

  137. 137
    BirdsofpreyRcool Says:

    EXXI — G&A for the quarter looks a little high… could account for the slight “miss” of EBITDA. CRT was expecting $63.8, Bloomberg consensus was $67.5, actual came in at $66.3mm.

    Looks OK to me… not much verbage about operations in the PR. Although I expect EXXI to fill in those details on the conf call tomorrow, could make for some interesting trading, in the first half hour of trading, before the conf call starts.

    Any thoughts, z?

  138. 138
    BirdsofpreyRcool Says:

    Rob — totally believe you! Bloomberg picked up the headline “ENERGY XXI 2Q EPS 46C” too.

  139. 139
    BirdsofpreyRcool Says:

    z — I would not be surprised if MMR put out a PR in the morning, ‘splaining the recent core and logging run. That said, I don’t think the core showed anything from the zones of interest. You never know what you’re gonna get, when you run a conventional core. It picks up core from a section you haven’t drilled through yet… so it could be anything. You just HOPE it will be something useful.

  140. 140
    zman Says:

    Will have thoughts in the morning. First blush, don’t miss estimates right after a deal. Second, if you are going to bother with an operations update put something in it. If DJ isn’t the whole story, then tell what is.

  141. 141
    zman Says:

    With 140 off my chest, I really don’t think the numbers for this quarter matter all that much, if its a miss it’s minor. I think the more important stuff is the go forward and they are saving that for the call.

  142. 142
    BirdsofpreyRcool Says:

    #141 — bingo. Totall agree.

  143. 143
    BirdsofpreyRcool Says:

    Actually, i read what i was hoping to read about current operations. That EXXI thinks they will be at a 30mBOE/d run rate by the end of Feb. That is great stuff and makes me very happy.

  144. 144
    BirdsofpreyRcool Says:

    EXXI — looking at the CRT 1/25/10 and the Johnson Rice 1/19/10 reports, EXXI revenues and EBITDAX came in a lot higher than both estimates. CRT was looking for $0.00 in 2FQ10 EPS, JR had modeled in a loss of 4c/share (i think, tough to tell exactly). So, I don’t call this an earnings miss at all… and I liked what I read about hitting 30 mBOE/d by the end of Feb. Now just waiting to hear MMR’s latest update. I would really hate to be short EXXI stock… but, there is no accounting for other people’s taste.

  145. 145
    john11 Says:

    Rob…in case you haven’t found a link:

  146. 146
    RobBanks Says:

    Thanks, John

  147. 147
    BirdsofpreyRcool Says:

    BedTime Market Strategist —

    “A PMI of 58.4 is a very aggressive number.”

    That is a statement made by ISM Chairman Norbert Ore today regarding the strength of the January ISM report. To provide additional color on the report, Ore noted that, “The more I look at the data, the more this looks like a typical recovery.” Although Ore would not comment that the trend of the data indicates a “V” recovery in manufacturing, the strength does indicate that a “W” is unlikely. According to ISM, the report will be consistent with 5.5% GDP growth. One metric Ore highlighted was the strength of the spread between New Orders and Inventories remaining wide as an indicator of future strength. A good example is the 1980 recession, when the spread widened for only a brief time period leaving the economy susceptible to the ugly double dip that was the 1981-1982 recession. The typical caveats apply – that this a measure of manufacturing and the weakness in the economy permeates deeper in the more significant services sector. It is still good to know that it is shifting towards a one front war focused upon the service economy.

    The ISM report highlights the story driving today’s trading. Not only was ISM strong, but worldwide manufacturing sector Purchasing Manager (PMI’s) reports beat expectations. The volume behind today’s action was unimpressive, indicating that investors remain cautious about chasing a tape that has exhibited such weakness recently. We expect investors will be watching closely tomorrow to see if upside follow through materializes, which is something that has not happened every time the market tried to rally over the past 2 weeks. Tomorrow afternoon, Volcker testifies in front of the Senate Banking Committee on “Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies.” That should make for an interesting afternoon. Remember, it is unlikely he will say anything different than what he has been saying for 2 years. The difference is that the Administration has only recently stopped ignoring him.

    Mom Knows Best.

    “You started with Nixon, and you’re going to end with Bush. Why would you do such a thing? You are going to do what you’re going to do, but I hope you don’t get confirmed.” — Hank Paulson’s Mom, 2006

    We like to say that everyone experiences their own reality, and today, the public received Hank Paulson’s version of the Credit Crisis and Great Recession. It is a refreshing change from insight received through the political grandstanding and second guessing that has been so common on Capitol Hill. It does not get more real than reading about the Treasury Secretary and former Wall Street titan sneaking away from his colleagues to call his wife and confess his insecurities, “What if the system collapses? Everybody is looking at me, and I don’t have the answer. I am really scared.” From “crisis armor” to “dry heaves,” the personal toll tells a different story than that to which we have become accustomed hearing during the quest for cover-ups. Paulson pinpointed August 9, 2007 as the date the financial crisis “arrived in force.”

  148. 148
    Jerome Blank Says:

    Chart updates…



  149. 149
    zman Says:

    Evening Jerome and thanks.

  150. 150
    zman Says:

    Thanks Jerome, just went through all, good stuff.

  151. 151
    zman Says:

    Hey Reef, another 20% day for CPE.

  152. 152
    baylor3217 Says:

    Bexp out with announcement.

    Up about $.70 ah

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