Wednesday – Oil Inventory Preview

197 thoughts on “Wednesday – Oil Inventory Preview”

1. Morgan Keegan initiates Energy XXI (EXXID 19.08) with an Outperform..

2. Thanks Eli, good to see, better late than never.

3. This came in last night… didn’t post, but good summary on the Volker/Political situation from BedTime Market Stratigist —

   Bit by Bit.
   The early tone for the session was set by earnings reports and guidance. UPS painted a picture of an economy that will be strengthening as the year progresses. CEO Scott Davis noted that, “Industrial production was up 7% quarter over quarter, but actually year-over-year it was down over 4%. We think that it’s going to continue to get better as the year goes on. In 2010, we actually see industrial production growing over 4%, but it’s going to take throughout the year to get to that level. It’s going to grow more at the end of the year than at the start of the year.” Despite expectations of a “challenging” couple of years ahead, earnings in the Housing industry indicated bottoming and builders are right sized for the environment. In the auto industry, GM raised its industry forecast for the 2010 seasonally adjusted annualized selling rate (SAAR) to 11.5 -12 million units from 11-12 million units. Finally, it is undeniable that the Volcker Rule was dead on arrival at the Senate Banking Committee today.

   Today’s rally pushed the S&P 500 slightly above the consolidation created by last week’s sloppiness. The S&P 500 now needs to prove it can sustain the 1100 level, then the 1115-1120 level will be the next level of resistance to watch. Today’s trading indicated investors are still tentative, favoring quality over risk. The breadth divergence between the S&P 500 and the Russell 2000 illustrates that point. Advancers led decliners in the S&P 500 at a rate of 6.75 to 1. In the Russell 2000, breadth was flat at 1 to 1.

   Populism 1, Policy 0.
   To gauge the market’s wagers on the Volcker Rule, one need not go any further than to notice that the Regional Bank group was the only industry group to close in negative territory. Today’s trading action was the opposite of that which transpired the day the policy initiative was announced. Nobody wanted to take a position overtly opposing Chairman Volcker going into hearings (would you), but the rumblings indicated the challenges that lay ahead. By the end of the hearing, that changed and the Volcker Rule appears all but officially dead.

   The day the Volcker Rule was announced, we opined that in principle, Volcker is correct and that most of Wall Street agrees with the principle. The concern we raised was with respect to the President’s delivery of the message. He was combative for populist political reasons and that alone was probably enough to kill it. The aggressive delivery of the message did not go unnoticed by the Senate Banking Committee. Here are some of the statements from Chris Dodd, the Democratic Chairman of the Committee, as he attempted to let Chairman Volcker down easy in his concluding remarks.

   “While I have certainly been familiar with the issue of dealing with proprietary trading and other issues, it does come up late, and the idea that the Administration made such a major point a week or so ago, seemed to many to be transparently political and not substantive. And it’s adding to the problems of trying to get a bill done.”

   “There’s only so much that this institution will tolerate at a given point in time. I’ve been around long enough to know what happens if you try and do more and bite off more than you can chew.”

   “I want you to know that, because it’s important from the Administration’s standpoint. We’re getting late in this game now. We need to do this right and we need to do it carefully, and I’ve been trying to do that, and I want to do it if I can on a bipartisan basis. I don’t want to go to the floor of the United States Senate begging for a 60th vote. I’m not going to do that. So I want you to know that as we go forward.”

   In summary, the President’s poor delivery during the initial announcement set the wrong tone and the damage could not be repaired. Chairman Volcker did not get as hard a time in the questioning as the Treasury Secretary or current Fed Chairman, but it was as tough as someone of Volcker’s elder statesmen status could get. On a political level, Volcker was set up to fail. If there are any points that were drilled home, they were the following:
   * Proprietary trading at Commercial Banks was not part of the problem.
   * Investment Banks were too big and too levered.
   * Despite the over 100 different regulators, AIG was missed by everyone and one strong regulator would have made the difference.

   One area where Volcker failed to get his message across was defining proprietary trading. Volcker commented that it’s hard to define, but you know it when you see it. As Dodd quickly noted, Volcker may know it when he sees it, but will a regulator? If you use AIG as the prime example, over 100 regulatory organizations failed to see the problems. The debate made the case for providing better guidance for rules already on the books and more vigorous application by the regulators.

   An important part of the debate centered on getting banks to lend. One point that Volcker did land was that if you get the banks out of these other businesses, they will refocus their business models on lending. One suggestion that Senator Jack Reed made, which appeared to resonate with both Volcker and the Committee, was denying banks the Government’s safety net protections (FDIC, Discount Window, etc.) if lending is not a large enough part of their business. That is a development worth watching to see if it gains traction.

4. Neither TT nor HT are willing to stick their neck out this morning. Think sloppy trading, although HT is thinking it will be to the upside.

   See VLO just announced two high yield debt deals today… will be interesting to watch where those price, after a sobering quarterly report.

5. Saw Goldman out yesterday saying Buy the weakness in oil service. Simmons out also saying the E&P calls will provide further evidence that Service is getting pricing power again, especially in the higher demand areas like the Haynesville. Goldman was touting HP and HAL which I happen to agree with.

6. Re 4. Yeah kinda sapped what little strength there was from the futures even though it was a touch better than expected. The real number to be concerned with is Friday payrolls, when they expect a positive number.

7. PXD opening ok but could be stronger were it not for the market, may add to my small $50 position for a post call bounce. Will wait for oil numbers which come out 30 minutes after their call starts.

8. BOP – you have an interest in TDW?

9. MMR moving to a new high here.

   I may just clip the last of the $15s and ride the $17.50s.

   PXD moving now. If they say kind words about the Eagle Ford, and I expect them to, look for ROSE to leg up, also EOG, HK to a lessor extent.

10. z — #8 ha! no.

    Learned the hard way (in 1980) that owning stock in crew boats is a good way to lose $$. That said, a lot of people make $$ in the sector… just not me.

11. BOP – just saw some negative stuff about day rates there, very tough business as you know.

12. z — i’ve been all over crew boats… in them, on them, invested in the company, ran around with the company brass. I’ve moved onto easier ways to make $$.

13. ZTRADE:

    EXXID – Added (2) March $15 calls for $5.40 with the stock at $19.85. High delta on these means it should move well with the stock should we get further catalytic news at Davy Jones. Went in small on the high side of the mid as these are traded very thinly.

14. BOP – but have you fished off of one?

15. MMR at $17.10, that’s a new high. Still holding the second half of those $15 calls and the $17.50s are waking up. Interesting that it’s moving here as only the rumor mill could be causing that.

16. fished off an offshore rig in Santa Barbara… not a crew boat, tho, you? catch anything??

17. If MMR stays strong this morning I would bet that it drags EXXID into new territory as well.

    BOP – me? Nope, wondering about the boats but the fishing off the rigs is fantastic. Of course, when you live in a landlocked state any offshore fishing looks good. Caught some nice tuna with the Louis Dreyfus guys back in the day, seemed like they had guys below the waterline putting fish on the hooks though.

    People are upping estimates at RIG for last night’s fleet status report. Helping out the rest of the offshore drillers.

18. Apropos of nothing, besides boats, can I just say I dislike the HOS management team? They have always rubbed me the wrong way. Was trying to quiz them in ’07 about downcycle scenarios and what could go wrong in a 1-1 mtg, and they treated me like I was an idiot. I was actually going to invest with them as the sell-side hadn’t adjusted properly for an accretive SeaMar acquisition, but just completely lost interest after that meeting.

    Not that I ever hold grudges against people.

19. PXD call about to start, they also speak at Credit Suisse Energy Summit tomorrow.

20. Who’s upping RIG estimates beside Tudor? RBC lowering on RIG EPS this morning, I didn’t love the fleet report. Tudor is already below consensus for that one

21. Thanks Z.

    Hi All, could someone give me a hand in finding some research information on Georgia Gulf Corporation (NYSE:GGC) on their acquisition (2006) of Royal Group Technologies Limited?

22. jat: (and everyone) keep qualitative comments coming; I have not spent one-on-one time with most mgts so I really value others reactions to mgt. Thanks.

23. jat — i think you made the right call on the HOS folks, fwiw. Good instincts.

24. Thx, appreciate it, though I did completely missed a nice 15-20% pop after all the sell-siders updated numbers for that acquisition 🙂

25. Jat – it was Tudor, Stephens cut them 35 cents to $9.70.

26. gotta go with your instincts… that’s why they pay you the Big Bucks!

27. PXD just walking through their reserve report at this point on the call, pointing out their conservatism in the Spraberry booking of offset PUDs, compared to unnamed others.

    Oil inventories in 20 minutes.

    NG up a dime now. Odd.

28. Copper doesn’t seem to have gotten the rally memo. Not a good sign.

29. PXD – Operations update

    Spraberry ramp up well under way

    31,000 boepd in the field for the quarter

    most wells to be deepened into the Wolfcamp or into new silt/shale intervals

    Sounds like 425 wells this year, going to 1,000 wells per year by 2012. This gets you 20% CAGR through 2013.

30. SP back to 1099

31. PXD – Eagle Ford

    2 rigs running, focused on the liquids rich band of the basin.

    Want to JV to accelerate drilling in 2H10.

    Excited about EFS, yada, yada, nothing new.

32. EOG continues to run strong, earnings next week. I continue to hold the Feb $100 strikes there.

33. PXD not yet saying anything unexpected, stock falling back with the market, group, no additional calls from me, will listen on into the Q&A.

34. EIA Oil Inventory Review:

    Crude was flat just before the release

    Inventories:

    Crude: up 2.3 mm barrels
    Gasoline: down 1.3 mm barrels
    Distillates: down 1.0 mm barrels

    Crude imports were up 560,000 bopd last week so the ramp in crude inventories is pretty easy to forgive, and should have been more expected by the Street.

    Demand:
    Gasoline: 8.613 m bpd , not bad, flat with last two weeks.
    Distillate: 3.659 m bpd, still very week, off about 75m bpd from the prior week, opposite of seasonal trend

    Oil up 20 cents after the report ….

35. More on EIA

    Cushing stocks fell 1.0 mm barrels to 32 mm barrels. Good to see this falling back, fairly supportive of crude here.

    Utilization fell further last week, now 77.7%.

    While imports were up, the import figure is still historically low, so all the OPEC cheating you hear about is be absorbed by increasing demand in other parts of the globe.

36. Any thoughts about IEZ as a way to play the oil service sector? Anything better?

37. BOP-do you plan to take a serious look at the VLO debt offerings when priced?

    Although the skt is unattractive, I recall that you mentioned that does not necessarily mean the debt is not attractive-I guess it comes down to the yield and whether they risk on interest coverage.

    Thanks.

38. PXD Comment –

    Industry has 29 to 30 rigs in the Eagle Ford comment now, wouldn’t be surprised to see it go to 50 soon.

    Oil is trading with the S&P now, I’d bet that tracks all day, especially given the strength yesterday.

39. WLT a little tempting as it backs off here, earnings tonight.

    Broad market losing its recently grown spine.

40. 45 rigs drilling EFS right now, cousin is major service provider in South Texas and keeps track of this.

    Z, ties with Louis Dreyfus? Used to work for them in OKC.

    Word on the street is PXD is running 25-30 rigs in the Permian next year for Sprayberry/Wolfcamp/Dean formation. Other companies benefitting from this activity: Legacy Reserves, Concho, Marlin, others.

    Email me if you need anything, recruiting engineers!

41. Tex – thanks for the color, they were guesstimating. Not surprised it’s higher, economics look equal to or better than core Haynseville according to a growing number of voices. That big PXD has held up a lot better than they thought it would, then you have the liquids.

    LD – used to follow them, thought a lot of Ronni Iranni, not sure where he landed. Also think Julia LD on Seinfeld was pretty funny.

42. Re Sprayberry, 50% IRR without the Wolfcamp, pretax at current pricing. Big ramp in rigs coming, said people are flooding into Midland looking for work, no pricing pressure from the labor side any time soon given U.S. unemployment rate.

43. I voted today re: JB’s charts…anyone else care to eh?

44. BOP – You see anyone with a negative post call EXXID comment?

45. PXD call over, pretty solid, mulling, stock flat.

46. choices — good memory. Bond investing is all about stable cash flows. Growth is great, but only so far as it grows cash flow. Stocks, of course, are all about growth… which is why you could have internet stocks going crazy up, with no cash flow… it was all about the future. With bonds, it’s all about the present. You have to make coupon payments with cold, hard, cash… not promises about the future.

    I hadn’t planned on looking at the VLO bond issues per se… except to note where they price. The problem with refineries is that if you really get in trouble, cash-flow-wise, you have to sell assets. The 2ndary market for refinery assets in the US is not so great… and hasn’t been for a while. That said, regardless of what Washington thinks, we are not all going to be driving electric cars any time soon… but capricious legislation (from washington or the states themselves) continues to be a risk to cash flow that I have a tough time quantifying.

    Of the bunch, VLO has historically been the best run. But there are a few too many moving parts, in the refinery arena, to take comfort from a cash flow model stretching out 5 yrs. The entry into the mrkt by cheap refining in India and expansion in Singapore adds another level of complexity to the model.

    Excuse my long-winded rambling. VLO bonds will most probably be money-good — company is currently rated Baa2/BBB (which is just 2 notches below investment grade). But I like easier situations to try to get my hands around. Too many balls in the air, with the refiners right now. JMHO.

47. BOP – agree very much your last sentence. U.S. demand very much a wildcard, as is regulation. Then you have foreign supply additions. Even if cap and trade is dead I would not rule out EPA acting without legislation to smack the local refining people in the head.

48. Voted 🙂

49. z — EXXID… yeah. MacQuarie out with a price target redux from $26.50 to $23.00. They were disppointed in the current production rate, they say. If that is truly the case, they weren’t listening to mngmt very closely. Figured EXXID would be at a 26 mbde at end of January, right where they came in. So, what’s the big surprise?

    Anyway, I think MacQuarie has been sitting out a lot of the EXXID run-up on the sidelines (although, to their credit, they have had EXXID at “outperform” since last Sept). Me-thinks there are a few “sour grapes” hanging from the MacQ Tree. But, that’s JMHO, of course.

50. #46, thanks again, BOP-good summary of criterion/refinery situation.

51. ATW – drifting up into earnings tonight. Their press releases are pretty scant. They generally do not miss numbers and the stock is off 10% from the recent highs. I stick by all my comments in the Jan 11th edition of the WIOWIO here:

    http://zmansenergybrain.com/2010/01/11/monday-morning-and-all-is-well-2/

    By the way, there are search and calendar functions on the left top part of the site for you new folks. Someone who has been here three years didn’t know you could search the posts or go back through the calendar to find older stuff until I told them last week.

52. BOP – wow. That’s just kind of dumb. It’s a ramp of hurricane impaired stuff, the quarter has no impact on the go forward.

53. EOG on Feb 10 – got to admit that is recovering nicely from the fall. They will fess up to having 4 rigs in the EFS and should have well results and their acreage position on the call. Although Papa can be cagey for quite some time, it has been quite some time.

54. z — i think they are missing the bigger picture by focusing on the near-term cash flow, but there you have it. And, speaking of cash flow, the EXXI 10s shore didn’t mind the earnings report. Quoted above par now. nice.

55. Jat – did you listen to NOV? Any thoughts?

56. BOP – yeah and thanks, thought the divergence between MMR which is up again nicely today vs EXXID which sold off after I took those calls was odd. I gave myself plenty of time with those to get log data on Davy, also went in the money so I would not pay that big premium for being in the room with so few people on the trade.

57. z — was just thinking the exact same thing… the MMR up / EXXID down doesn’t make sense. Anything “good” that happens for MMR at DJ is 2-times-good for EXXID. But, there is no accounting for Mr. Market’s Mood, sometimes.

    For an extra-dose of that last comment, just refer to PXP’s price action. The stock seems to exist in it’s own private idaho…

58. Cargo… I use IEZ for my PA when I’m in compliance danger on individual names, and I do it because of the weighting to its two largest components.

59. Have to step away for a bit. Keep the wolves at bay for me.

    (I think we close the day in the green… but, with deference to HT’s comment that it’s a Crap Shoot kinda day.)

60. re 57 – Exactly.

    Jat – better weightings than the OIH which is heavier in some of the biggies.

61. No, wasn’t on the NOV call, was on PXD. My friends are saying that the only incremental beside the EPS beat was that a floater was part of the new orders, and the floater wasn’t PBR. Beat due not only to greater pull-through / better execution of backlog but also from a sandbagging of margin guidalce and PSS, which benefited from premium pipe sales.

62. “Never short a country with $2 trillion in reserves?”

    http://mpettis.com/

    Interesting discussion of the Chanos thesis. The only part I am qualified to comment on is that Tom Friedman is indeed a dolt, although Mr Pettis is far too polite to actually say that. He merely demonstrates it.

63. The BDI has been dropping consistently, maybe that explains price action in copper.

    Bill- I am assuming it is still not time to look at the shipping cos.

64. BTW, I think the Chanos thesis (that China is a short) and the current action in copper might not be unrelated. Which would not bode well for commodity markets across the board.

65. Jat – thanks much, just what I wanted to know. So maybe no legs, anything on the go forward?

66. elduque – yes, BDI is at least consistent with copper & also the China question.

    The thing is, the people running China are not geniuses. The system there is doomed to fail at some point, since it is still an autocratic command economy. They will drop the ball in a big way at some point & maybe that point is approaching.

67. Dman – got a link to the Chanos thesis itself?

68. ok what’s the WIOWIO acronym mean?

69. why I own what I own

70. regarding copper, I sold my FCX Feb 70 Calls yesterday on the recent $7 run up (after the +$20 plummet). Just felt the name was too volatile and wanted to lighten up a bit in cash.

71. KOG up to 2.67 on today’s high. that’s a nice move after the plummet from 2.90ish to 2.20.

    Thoughts on near term catalyst and timings? I re-averaged in with a decent sized traunche in the high 2.30s

72. Re KOG – Next catalyst, wells 10 & 11 should have data pretty soon (next few to several weeks). They’ll do a Three Forks Sanish test in the first half.

73. China does have alot of the bubble aspect to it. For example if you say anying negative about China, you are verbally attacked. Too me, when people are so passionate about a position, rationality goes out the window.

74. yeah this is always to hard part for me in trying to decide when to take profits on a “trade” and when to hold on for further upside.

    Any thesis on how much upside we could get (or possible downside) from the well 10 and 11 news?

75. WLT – deciding to sit our earnings tonight. Last couple of time it has beaten, and performed poorly for a couple of weeks following a strong call, in this market could see that happening again, so will wait to see numbers, if it run, nothing lost as it is still cheap here and the drivers that it and others have been espousing will not evaporate soon or be discounted with a day’s trading.

76. Dman – To me, the thing is, the people running China are exercising common sense… something lacking in the past 30 years in North America. You don’t need to be a genius.

    China is taking steps to reasonably support it’s economy like securing resources.

    This whole Chanos thesis is a joke although I’m sure there are bubble stocks in China, just as there are here.

    When you have that many people moving up into the middle class you are bound to have above normal growth and especially when you consider that the savings rate in China is healthy. Once they can convince their people to spend ie, when they get move up in the middle class there will be even more spending.

    All this stemmed from the fact that they are doing to the right thing to moderate growth. Now everyone is saying it’s a “bubble” because that’s the only “growth” we’ve seen in North America in the last 10 years.

    Yes, the policies in China are pro-growth and for a reason, they need to grow to bring more people out of poverty.

    Keep in mind that even if the dollar peg were to be be altered or removed completely, China will still produce the lowest cost goods because of the relatively low labour cost.

77. Baylor – it would just be a wild guess. If they botched those wells you’re probably looking at a $2 test. I have no reason to think botched them and from a geographic part of their acreage standpoint, they are safer than the #9 well was.

78. HAL may restart share buyback in 2010 – CFO speaking at Credit Suisse 20 minutes ago.

79. when is the presentation does Mark say 78?

    also, would be interested in reading Chanos’ detailed thesis as well.

80. Oil at the whimsy of the S&P, now down 30 cents as the market runs back to near the LOD at 1094, was up 50 cents not long ago. Not a lot of market confidence out there today.

81. Jat – wasn’t listening, it came across as a Reuters headline.

82. Z, See action in PXP Feb. $35, calls

83. nm, found it

84. MHR – Small steps. This is from the Sharon Resc’s acquisition last fall.

    Magnum Hunter announced successful drilling and completion results for Eberstadt # 1 well (2.15 )

    Co announced successful drilling and completion results for Eberstadt # 1 well located in the South Caesar Field of Bee County Texas. The Eberstadt # 1 began flowing to sales on February 1, 2010 with a daily production rate of approximately 1,500 Mcf. The Company spudded the Eberstadt # 1 on November 24, 2009, completed the well on December 18, 2009, and fraced the well on January 28, 2010. Total depth of the Eberstadt #1 is 10,600 vertical feet with production from a gross 100 foot thick section of the middle Wilcox formation. Currently, the Eberstadt #1 is exhibiting a flowing tubing pressure of 3,600 psi through a 12/64 inch choke. Expected levels of daily production are anticipated to increase as the well is still cleaning up post the January 28th frac.

85. Scoop – looks like a spread, see the $29s, also, maybe a calendar deal with the $35s of March picking up. Makes sense that the stock will play upon more definitive data.

86. China … I am most definitely not a China expert, BUT the idea of the $2T in reserves may be off the mark, simply due to the debt bombs hiding in China’s banks. Plus there is reason to doubt the veracity of China’s growth numbers as there is no transparency (our govt is now trying the same thing).

    On a technical basis, I have seen a lot of compelling arguments regarding China having topped out.

    So, be careful.

    And Tom Friedman is a total dolt (for many reasons). And he just loves Chinese autocracy.

87. VTZ-last point on low cost should include a caveat that if RMB floats and logistics costs escalate, then decisions on import from China or mfg USA/(in country) will be impacted.

88. Z: WLT — keep an eye on their long wall installation that was suppose to take place in the fourth qt. These long walls are not as easy to install as some analysts think, and can cause production delays and cost overruns.

89. ATPG … I saw the news; see the downgrades.

    Any thoughts on where this might be a buy ? Here ? Lower ? Nowhere ?

90. BSJ – yep, a common problem at ACI.

91. Z: I always wonder when ACI is going to get rid of their underground mines. They talked about that a few years ago. They wanted to be more like BTU. I thought with their PBR transaction they might be headed in that direction. Maybe they are waiting for a better market.

92. KOG — near-term milestones… think well #10 will be completed by Feb7th, well #11 by Feb26th. There are no secrets, amongst the Bakken players. If #10/11 looks to be good (and they should be), then KOG has to move tanks onto the site and get ready to hold production. Also, there will be flaring from the well, pretty easy to spot at night. So, think the recent runup is due to expected increased production coming on this month from well-pair 10&11. Probably won’t hear an official annoucement until the end of Feb/beginning of March. But these next wells should be good ones. KOG feels they have learned a lot about how to complete wells over the last year or so.

93. ZTRADE:

    HAL – Added (20) HAL $31 Feb Calls for $0.67 with the stock at $30.50. I own the $35s as well from before the earnings release last month and while the numbers were good and the story seems to be firming the broader market downdraft took the stock lower. My sense is that as the E&Ps announce 4Q results, service pricing traction will be verified by many especially in North America. Management mentioned earlier that they may start a buyback and that may get a little traction with investors in coming days.

94. Re: #89 ATPG, I’m keeping an eye on ATPG…there is strong support at $13…see the new posted charts and comment…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

95. MIDDAY OVERVIEW

    Market Update – there are a bunch of earnings-related situations that are pressuring the broader tape. The strong short-covering that helped so much on Mon and Tues not repeating today. The problem is that outside of short covering, we aren’t really seeing vanillas stepping in on weakness to add to long positions. That said, we aren’t seeing the across the board selling/shorting that hurt so much late last week. Some fundamental items weighing on the tape today: 1) eco headlines – the ADP “beat” the St, but still showed private sector job losses; a separate survey from Challenger revealed a sharp uptick in layoffs. Meanwhile, the service sector continues to suck wind (as evidenced by today’s non-manufacturing ISM). 2) a few earnings situations pressuring major groups (like MET in financials and PFE in health care). 3) new sovereign worries in Europe – focus on Portugal and Spain – see below. Looking at technicals, 1105 is near-term resistance (we hit 1102 this morning) while 1095 is support (approx. the lows of the session so far).

    Equity Sector Update – red across the board but financials and health care are weakest performing groups. Within financials, the regional banks fall more than 2% on the day as this group sees profit taking for a second consecutive session (note its still up >7% YTD, one of the best groups, but has been for sale over last 24 hrs +; capital raising hurting sentiment). Life insurers are also for sale on back of MET’s earnings (MET is off 4%). Health care drops >1% on the session, w/PFE falling 2%+ on back of earnings. The HMOs are also weak (reports that Congress next week will vote on ending the industry’s anti-trust immunity hurting sentiment). Tech is flattish on the day, one of the better groups (JDSU, LXK, GOOG, WFR, AAPL all helping the space while VRSN and WU dip 6% after earnings). The transports fall 1.7% and are one of the weaker groups (R falls 9% and CHRW is off 6% – both on earnings). Energy is off ~0.5%, w/coal stocks strong (MEE earnings helping) while refiners are weak (TSO dwn 5% post earnings). In the materials, paper stocks coming for sale after IP earnings (IP falls 7% on the session today). Media is one of the market’s best performing groups today (NWSa is up 6% after earnings although TWX dips 1.5%).

96. BOP – do you know the lateral lengths on these two wells?

97. Pack – Seriously, did you just comment on the debt bombs in the China banks? You realize you live in the debt bomb capital of the world, right?

    As for whether the GDP number is 10% or 7% does it really matter?

    Skimo – Agreed that will be a decision that needs to be made. But to be competitive they are either going to have to pay US workers basically nothing or impose trade barriers. Last I checked, trade barriers never worked. If a final product is a substitute for another, consumers will ultimately pick the cheaper one for the same reason that Walmart is so huge.

98. Re: #94 ATPG, also add that $13 prints right at channel line support, unless there is a good fundamental reason not to buy, that’s the spot…if it gets there…

    RE: #43, #48, thank you for your vote, jiveyjr and sunshine, also thanks milepost, I believe from yesterday…

99. KOG — they are both short laterals… 10 = 4,729 ft, 11 = 4,188 ft. So, doesn’t have eye-popping BEXP IP potential.

    Funny thing is, KOG itself has come to the conclusion that long laterals are probably more economic. Don’t know why these are short, think it just has to do with the geometry of their acreage at that location and their plan/timing to get all their acreage HBP by the EOY. But, want to see them drill more long laterals in the future.

100. BOP – are their HBP issues pressing/do they have lease expirations next year? Also, did they give the number of stages on those two, if you’d rather I just call them I will.

101. Z – I heard about the Chanos thesis via a video on Tech Ticker where they queried Marc Faber about it.

     http://finance.yahoo.com/tech-ticker/article/403205/Marc-Faber-Isnt-Sure-When-China-Bubble-Will-Burst,-But-Itll-Be-Bad-News-for-Commodities&comment_start=21

     There was a write-up about it somewhere but it was more of a profile of Chanos, so not much red meat there.

     In the interview above, Faber suggests that Chanos is probably right but that the thesis could take a long time to play out.

     In his latest market commentary, Faber seems to have moved further toward a skeptical view of China. In 2005, Faber was commenting that the China regime would inevitably collapse and be replaced by something else (i.e. a different form of government). He thought this would occur in a 5-10 year timeframe, if I recall. So we are now in the early part of that frame and sure enough, China is facing rising internal tensions and its government is becoming erratic and heavy-handed, especially in foreign dealings.

     The reason China has pushed so hard for growth is to keep the angry mobs at bay and try to keep the ruling party intact. Gosh, what could possibly go wrong?!

102. Hey BOP – the real trick is to hold acreage and not drill a well for as long as possible, a la AEZ, lol. They should be forced to talk about their first Bakken well soon.

103. KOG — No pressing HBP issues. They just have a production plan for this year and they are sticking to it.

     KOG really tried to drive home the point that it is not the number of frac stages, it is the length of the individual stages that people should be watching. They think that 350 to 400 ft/stage is what works best. I am assuming (with all that implies) those are the stage lengths they are useing at 10 and 11. Otherwise, why bother making that statement?

104. Dman – thanks. Saw a thing awhile back that China is spending 5x (or thereabouts) what they admit they are on the military. Wonder what they are up to …

105. BOP – thanks. BEXP mentioned the 350′ mark in their last presentation, but at the same time, I sort of thought they were doing 5500 laterals so with 30 stages that would be 180 feet. Will check. Is a KOG well running about $5.5 mm drilled and completed?

106. oops… it’s in KOG’s presentation… #10 (4,729 ft) = 12 stages (about 395 ft/stage) and #11 (4,188) = 10 stages (about 420 ft/stage). Frankly, it’s probably about 375 ft/stage, as you can’t frac all the way to the toe and heel, i think.

107. KOG — short laterals, drilled and completed, are $5mm. Longs are $6.5mm. So, good avg guess.

108. BOP – re 106, right, gotcha, thanks.

109. More about KOG’s 2010 production plans… they will drill 18 gross wells. 14 of those wells will be long laterals. Since 10 & 11 are short, that means only 2 more shorts and 16 longs. Should be a nice year for them. They think they will be running at around 3mb/d net by eoy 2010.

110. My bad, BEXP’s last wells are 9500 foot with a 28 stage one costing $6.3 mm, so a 350′ separation between stages. They were drilling 5,500 footers in the Ross area a year ago.

111. BOP – that implies a pad for #12/#13 will be long laterals.

112. I think that is right.

     Also, they will be drilling #14 from that same pad. I think it will also be a long lateral… but it will test the TFS.

113. BOP – MMR still up but not as much. Those Treasure Island warrants also up today (TISDZ) on tiny (but bigger than normal volume) so it’s a good bet someone thinks they know something about Davy.

114. Is #14 (TFS) an April spud?

115. Well…. you don’t drill another 550 ft or so, at the rate they did, without it being in sand. And if it’s sand, it’s probably safe to speculate that at least some of it can be counted as additional “net pay.”

116. Z – recent Chinese rhetoric toward various Western countries has been quite belligerent and is a clear departure from previous measured statements. Frankly, it looks to me like hubris and also that they have simply decided to “let it all hang out”. It’s just that a lot of the world had forgotten that whilst their communism may no longer be very “pure”, their authoritarianism has always been extreme.

     Needless to say, authoritarian extremists are rarely competent economically. For example, their steel companies were very upset when the bigwigs in Beijing decided to ruin the close relationship between the steel mills and iron ore suppliers like RTP. They kidnapped the RTP negotiation team (they are still being held, BTW) and seemed to think they would get a better ore price that way. Instead, the spot price jumped 10% and the ore companies are cautious (to put it mildly) about sending negotiators to China. Last I heard, they intend to negotiate with the Japanese and Koreans and tell the Chinese that they can have that price too – take it or leave it.

     Multiply that example 1000 times and you have the Chinese system of government.

117. BOP – roger that. Liked the “never say never” response from Schiller when asked if they’d be done drilling at 29K or if they’d go after Tuscaloosa.

118. They should be drilling #12 now. They will drill all 3 (#12-14), then move the drill rig off, clean, and move a completion rig on. It takes about 3 weeks to clean up a site and haul tanks on to hold the expected production. Then they will move the completion rig onto the pad and complete all 3 wells. We should hear the results from those wells sometime in May.

119. And BOP – sorely tempted to add to EXXI call position, wish it were more liquid. May take some more higher strike MMR and punt the last of the $15s to uprisk that position. Guessing we are anywhere from a day to three weeks on more news, figuring they tie the log to the lab work on the core and maybe you have another log to run first. I’d bet against another core for now but then I would have bet against them taking the last one. No sidewall cores for sure though, just too much risk.

120. BOP – did they mention a spud to TD per well?

121. EXXID — they are not going to let the yardstick determine the TD. JB has made it pretty clear that he will drill DJ until he can drill no more. The hole is too narrow to set another string of casing. So, when this stage is done, they can drill no more. How far they can push this stage? I have no idea. Missed my “Production Engineering 101” class.

122. 10 and 11 took a longer to drill. Apparently, things move a little slower, when it’s -30 degrees outside. #10 took 38 days. DK on #11.

123. Oil back to up 25 cents based on the loss in the S&P on the day being halved and nothing else.

     What’s got the dollar up today V, we were starting to make progress.

     Dman – re hubris, maybe they watch SNL:
     http://www.nbc.com/saturday-night-live/video/clips/china-cold-open/1178451/

124. Dman – I agree with regards to the authoritarian comments.

     Hubris like a bondholder wanting to get its dollars back? If you wanted to borrow a few trillion dollars from me I damn well better have some say in what goes on.

     Nobody has said anything so far to suggest that their growth has not been real and/or sustainable.

125. jat=thanks.

126. BOP – thanks for that. Hopefully they get a move on this year, I’m sure they will.

     BEXP drilled their last well in 18 days with a long lateral. This one has not been completed yet and is going into the catalyst list as “any day now through the quarterly release”. I asked other operators in the area re weather over the last several weeks and they have come back with not hurting us on drill times, but maybe on completions a bit. But maybe it was colder on their pad, lol.

127. RE 123 dollar: I couldn’t tell ya. If it rolls back over here without a new high it could be a sign that it’s ready to make a move lower, but that I have no clue about the move today.

128. S&P went up and kissed 1100 post lunch and immediately backed. The TA bears must be just licking their chops.

     V – thanks, makes two of us. I’d check CNBC/CSPAN but I really doubt it’s much more than noise.

     BOP – sent you some reading material. Thanks for answering all of my pesky questions.

129. I’m holding LINE long term. Do you consider it fully valued?

130. yeah — i shudder, when i hear the “weather” excuse. But, i shudder when i hear “thirty below” too. So, who knows.

131. Cargo – I am holding it long term as well. I don’t see the big run we had last year occurring again in the near future, not until either commodity prices rally and they can add hedges in the out years higher than here or they make an accretive acquisition. Given their distribution coverage I think we see a minor, minor increase in the dividend later this year. I think VNR probably has more room to increase its dividend again this year. But I hold it for the yield and I suspect I will keep it until I see something better to replace it with. If interest rates start rising i would suspect these names will come under some pressure but I don’t see much of a rally in rates in the next 9 to 12 months.

132. BOP – hear ya and I wasn’t knocking them, just trying to get my head around it. A year from now they can say, “remember that a year ago, our 10th well took 38 days to drill, but we drilled the last one in 18 days” and they’ll be heroes.

133. Z – amazing SNL video.

     VTZ – hubris in imagining that the world is now unipolar and they are the pole. If they actually started inventing any technology themselves, I would be impressed.

     The global resources picture rules out any possibility that China’s growth is sustainable.

134. Dman – re the global resources picture – but that can go on for a long time… or at least I’d like someone to explain it to me using math why 2010 is the end for them and not simply a slow down from growth that is unsustainable to growth that is sustainable. Been a long time since my international econ courses but if anyone wants to put some numbers to their problem I’m willing to listen.

135. For those obsessed with EXXID (raise your hand and say “here” with me)… the CS presentation starts in 5 mins.

136. Thanks, Jerome, for the updates-I’m fully aware that it does take a lot of time-I also voted-you are moving up on the list.

137. BOP – hey, thanks for the reminder, had my head down reading some new copy on them.

138. Jerome, what importance do you place on the price ojb on the P & F charts-e.g $SSEC is close to bearish obj but Baltic Index is a distance away from its bearish obj. (on Stockcharts)

     Thanks.

139. S&P has bounced off 1,100 twice since lunch, pretty directionless sloppy.

140. EXXID – talking about a new exploitation target they picked up a rig for today. Bread and butter stuff.

141. Z – #134

     yes, the sustainability issue is much longer term – i.e. it is impossible for all of China to acquire Western living standards.

     Not a 2010 issue, except in that crude is still quite high for the middle of a “decession”. But I don’t think resource constraints have anything to do with the Chanos view.

142. EXXID – Should TD in the next 2 days, then log.

143. ha! Schiller just sharp-elbowed the Shale Guys with his free-cash-flow comment. But, it’s true. The ultra deep wells are expensive, but they payout big and fast.

144. Watching the tick on MMR with his comments, pretty responsive to the TD in 2 days, and log comment.

     $350mm revolver signing tomorrow, talking about working the debt down.

145. oh good… broadcasting the Q&A at EXXID

146. i think Schiller is playing coy about M&A on the shelf… woudn’t be surprised if he’s in there on the DVN assets, when all is said and done. But, for now, he’s playing possum on being interested. Smart.

147. EXXID – investor day March 4, should know a lot more by then.

     BOP – yeah, glad to hear the Q&A.

148. BOP – me either, after all Devon bought the stuff he worked up at Ocean.

149. … he’s going to be well aware of where there are satellite barrels to exploit.

150. #148 — great point! “Don’t throw me into that briar patch… please.” ha.

     Love the geology explanations. I was with Schiller… I had no idea you could have porosity (much less perm) at greater than 25k ft. My world will never be the same.

151. Z… one to keep on the radar…. http://www.prefixmag.com/news/cash-money-owners-starting-oil-company/37044/

152. #136,#138, choices, thank you…I generally don’t put a great deal of weight on P&F price objectives, the exception is when the price objective correspondes with other important technical points, the most recent case I can recall was ROSE, there was a high probability that $23 would act as strong resistance, so I mentioned it, strong TA resistance combined at the price objective…I also like to use price objectives to exit out of profitable trades…

153. BOP – they get these to work in a year and I’m likely to be net short onshore gassy E&P, with a focus on the higher cost shales.

154. 94 – Thanks Jerome.

     97 – VTZ. Yes I did. Yes I do. Yes it does.

     And China will be even less able to absorb a crash and the resultant political instability than we will. And as the growth engine of the world; well, you can guess the rest.

155. Nifkin, lol.

     EXXID – so maybe something Monday, maybe nothing until month end on Davy.

156. RE 154: Well Pack, the only ones seeing political instability so far is the West with their mish mash of counterproductive policies. China has stayed the course.

157. Crude all over the place, jump 70 cents in a trade as we move to the close, weird.

158. Gasoline up another % today by the way after a strong move yesterday.

159. JimBob is driving the boat. It goes where he wants to go… no one else gets a turn at the wheel. Davy Jones will TD when JB says so. If he wants to put out a PR about it, he will. If he wants to log first, he will. He’s in the drivers seat.

     It’s good to be JB.

160. Z and cargo, I agree on LINE. They have out of this world great hedges but have maxxed out the dividend with a mere 1.0x coverage. Kind of a dangerous approach, especially with future strips so much lower than their current hedges.

     But LINE is well managed and maybe can grow enough to maintain or increase the dividend.

161. If you are willing to take a position in PXP, you also have to be willing to take a few mule-kicks to the head too. In the longer run, I think it’s worth it. In the shorter-run, it gives you a smacking headache.

162. Just odd that MMR is one of the consistently green names today and not the other two. Ok, not really odd that PXP is down but EXID should trade on roughly the same idea at the moment.

     Group meanwhile just doing its high beta routine to the market.

     Crude trading extremely erratically, anyone see something geo-political going on? Up 30 cents from down 30 cents in a second.

163. Mars crude system maintenance cutting 350,000 bopd for a few days in March. That would probably be it.

164. EXXID hosting analysts for dinner tonight at CS. Maybe they all get drunk and we get to hear some good stories tomorrow.

165. RE: #161 PXP…still technically sound…PXP holds its x’s until a print of $33, but remains on buy signal, $33 is right on 20 day SMA which should act as support…if bullish, this is a reasonable spot to consider a long on an intraday reversal …

166. Z, What did I miss re #162 that it is not odd that PXP would be down today?

167. Thanks, Jerome. Softens the mule-kick a bit.

168. Scoop – apologies for the sarcasm but the stock has acted poorly compared to its peers since the first Davy pr and is about to give back the move following the Lucius well confirmation. Just not getting much credit.

169. That’s why i think PXP may be taken out. No one wants to toss their hard-earned sheckels into the pot with Flores. I have to think he is on a short time-line to either turn this around, or the Board will have to make some strategic decisions. JMHO, of course.

170. Are we hearing good news re MHR?

171. Cargo – did you see #84?

172. EXXID – interest that volume has been picking up each day since the reverse split, except for today, the slightly down day. Generally my experience has been you get heavy volume the first day and then it declines, not the other way around.

173. 10Q out now on EXXID

174. TY Isle

175. #84 was so long ago I must have forgotten it.

176. TSO speaking at CS now. Painful.

177. VTZ – you call this political instability ?

178. ATW – holding my $35 and $40 calls into earnings tonight.

     Revenue all but locked in for 2010 and a big chunk for 2011, should not be big surprises on the call tomorrow, just an update on what little of the fleet is unleased later this year, maybe comments on their 1 idle rig (probably not though) and then whether or not they are on schedule with their 2 new build rigs, each of which should add a little over $1 EPS to the company when they come on starting next year.

179. VTZ – without getting too immersed in politics; let’s just say that the legitimacy of the Chinese regime is, uh, questionable, and is whatever Tom Friedman-esque word you can come up with, a dictatorship; autocracy; semi benevolent dictatorship; whatever.

     Here, we have a bunch of corrupt and incompetent bums. But we elected them. And we can get rid of them non violently.

     How will the Chinese change their rulers ?

180. BOP – what exactly is Flores notorious for?

     VTZ – #156 I would just point out that China’s course was not plotted in opposition to the West. On the contrary, it was aided and abetted every step of the way. Western governments permitted and Western corporations encouraged the hollowing out of Western economies, with the wholesale wealth transfer to China that this entailed (along with skimming off to the corporations that made it worth their while). And the whole time we had to listen to endless “economists” telling us that it was good that we were losing jobs, industry and knowledge. Why was it good? Because “consumers” would be able to buy everything really cheap.

     As with a lot of arguments from economists, this was transparently moronic and the results, forseen by pretty much everyone except economists, are now in.

181. ATW and WLT after the close CRR and DO before the open.

182. Well the fact that Obama was a god 2 years ago and now there’s the Scott Brown Revolution. The Fed and Treasury are under fire. Bills and reforms come and go quicker than cars around the track in the Indy 500.

     Although it’s far from political turmoil, it’s not exactly steady as she goes.

183. Z- are you expecting more news from NFX before Feb options expiration?

184. Dman — bill had a most excellent discourse on the “Why Everybody Hates Flores” topic a while back. If someone can recall the day, it’s worth tracking down and bookmarking.

     bill?

185. NFX. Earnings on the 17th, that would put 6-8 more granite wash wells in the public arena, news in the Bakken, including a well near Rough Rider, more comments on their Alberta Bakken play, and a reiteration to the marketplace that they too are getting oilier.

186. RE 179: You can get rid of one politician for an exact replica who is bought and paid for by a different interest group non-violently you mean.

     Ron Paul is the closest available to a legitimate change.

187. Beerthirty

188. BOP – at a minimum, I look forward to hearing that he bought half the company on margin and then crushed the stock selling into margin calls 🙂

     Good assets with dodgy management. Could be a good stock trading vehicle. Buy when the cup of hatred runneth over. Sell when temporary forgiveness sets in.

189. Fixin (put that in for Tex while he is out recruiting) to start powering down everything and head out for home. I will leave one last bit of foolishness for my time away.

     http://screencast.com/t/ODQyMThkN

190. Dman — yep…. have to admit, Aubrey is in a “class” of his own. But people who have invested with Aubrey have been subjected to a lot over the years. Maybe not quite to THAT extent… but, a lot.

     Jim Flores was supposed to walk on water. That is a tall order, for a 300-lb guy… and he failed at the task, repeatedly, over the last 2 yrs.

191. Flores bought 3Tec from Floyd years ago and was an ass about the transaction as I recall. My $.02

192. This was probably the little weird move in oil earlier:

     http://news.yahoo.com/s/nm/20100203/ts_nm/us_iran

193. Atwood Oceanics beats by $0.05, beats on revs (36.16 +0.42)
     Reports Q1 (Dec) earnings of $1.03 per share, $0.05 better than the First Call consensus of $0.98; revenues fell 0.8% year/year to $164.2 mln vs the $157 mln consensus.

194. ATW on the tape:

     Revenue of $164 mm vs $157 mm expected
     EPS of $1.03 vs $0.98 expected

     reading 8k now

195. Iran launches “a mouse, worms and two turtles” in a rocket. According to the article, they might have gone 60 km up. Low earth orbit starts at 160km, for reference.

     The White House describes this as “a provocative act”.

     Well, I’m sure all the mice, worms and turtles are seriously provoked. In fact, I hear they have just put up a resolution condemning Iran in the General Animal Assembly of the UNAPNA (United Nations of Animals, Predators not Allowed). Oh, wait a minute. Maybe mice sometimes eat worms. It gets complicated.

     But I’m sure the WH has every right to describe it as “a provocative act”.

     Now, for comparison, how would the WH describe the following:

     Country A invades country B (which had not, nor was capable of, attacking country A). Seven years later, the war continues. At least a million people are dead as a result. 3 million are maimed, 4 million have fled as refugees. Country B is, for all practical purposes, totally destroyed.

     Would that rate as “a provocative act”? Of course not, because, you see, there has been no documented evidence that any mice, worms or turtles were harmed in the filming of this war. See? It’s so simple.

196. ATW – Costs came in hot to guidance so its a good thing they beat on the top line, driving through the bottom line beat. As usual, no color in the release, more deets in the post tomorrow before the call.

197. bondbuddha — thank you for your 2c.

     In this biz especially, what comes around, goes around. There’s nothing wrong with being 300lbs… you just shouldn’t shouldn’t step on other people’s toes so much.

This site uses Akismet to reduce spam. Learn how your comment data is processed.