Tuesday Morning

Posted on by zman

 

Market Sentiment Watch: Yesterday was a cautious, low volumes (at least in energy land) day in the market. Fear over more European sovereign debt troubles and continued worry over more banking regulation in the U.S. led to a late day sell off in financial equities and the broad market but energy was relatively unscathed.  Today, equity futures and maybe Trichet hoofing it home a day early, perhaps with a Greek bailout in in mind is helping.

Ecodata Watch: We get wholesale inventories (last reading 1.5%) and Job openings (last reading 2.42 million) at 10 am EST, not exactly heavy hitter numbers for the market and the rest of the week's calendar is fairly light as well.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update - still no margin momentum
  4. Stuff We Care About Today - EOG preview, ANR, CRK
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $11,100
    • 27% Cash

  • Yesterday's Trades:

    • None


Commodity Watch

Crude oil inched up $0.70 to close at $71.89 yesterday. A slightly weaker dollar and buoyant equity markets (before the close of Nymex) boosted crude. This morning crude is trading up a buck, again on dollar weakness and equity futures strength.

  • Early Read On Oil Inventories: (from the Bloomberg Survey)
    • Crude: Up 1.5 MM Barrels - this could be smaller than expected, once again due to reduced imports although my confidence of that filtering in this week is less high than it was for the report two weeks ago.
    • Gasoline: Up 0.5 MM Barrels
    • Distillates: Down 1.5 MM Barrels
  • OPEC Watch: According to Reuters, three U.S. refiners said Saudi Arabia will keep their U.S. crude allocation flat, so don't look for a rally in imports any time soon. Saudi is the 4th largest importer to the States (after Canada, Nigeria, and Mexico), and traditionally, March is the time when you see fairly significant ramp in imports as the U.S. refiners prepare to build gasoline inventories to meet summer demand. Mexico is unlikely to be able to significantly bolster imports either putting the burden on Canada and Nigeria both of which may be able to partially offset Saudi volumes. 

Natural gas retreated $0.11 to close at $5.40 yesterday. After a strong start on the current cold forecast, gas succumbed to profit taking. Expect to see at a minimum 2 more withdrawals of the larger variety (175 to 225 Bcf) with the likelihood that more follow as the longer range forecasts are now showing persistent cold through February and into March. This morning gas is trading up slightly.

  • Imports Watch:  Slight uptick with cold weather demand in the U.S.

    • Canada: 8.5 Bcfgpd, up 0.6 Bcfgpd from last year.
    • LNG: 2.0 Bcfgpd, up 0.4 Bcfgpd from year ago levels

The slight uptick in LNG and Canadian piped volumes due to the cold last week, probably won't have much of an impact compared to the amount of cold we're seeing. No big kahuna gas draw expected in this Thursdays's number like we saw several weeks back but we are making progress in eating away the surplus and after this week, that should accelerate significantly as the comps get increasingly easy to beat and U.S. weather remains (at least in the eastern two-thirds of the country) colder than normal to much colder than normal.

People should be looking for a return to 170 Bcf + numbers for this week and probably the next two weeks. Year ago comps:

  • this week: 164 Bcf
  • next week: 44
  • week after next: 90


Storage is at 2,406 now and could be through the 2.0 Tcf mark a week from this Thursday due to the current cold spell. From there, there is still a good shot at getting down to 1.5 Tcf with the remainder of winter which would be supportive of natural gas in this range bound land of $5 to $6 until summer related demand crops up and we start to see a resumption of production declines following the Nov-Jan string of delayed well completions.

Crack Spread Update


Key Takeaways: Nothing to see here folks, move along. Just when you thought the at least the West Coast margins were starting to bend up, the collapse. The domestic independent refiners continue to dribble lower and the quarterly calls to date from VLO and TSO can be summed up as "2010 is likely to stink". I continue to watch but avoid the group. 

Stuff We Care About Today

EOG 4Q Preview

EOG Comments:

  • Traditionally one of the gassier E&Ps, now getting oilier (and doing so faster than its peers) via a number of high profile oil plays (Bakken, Barnett Combo) and quieter plays
  • Valuation: At 6.4x 2010 CFPS of $14.28, the name is not expensive; balance sheet is exceedingly strong
  • News expected on a Three Forks test in its Parshall field, the core of the Bakken.
  • Bakken may see them up their previously disclosed 14 rig program.
  • Also, likely they will spill the beans on the size of their Eagle Ford Shale position, rumored to be running 4 rigs now but have done little more to date than acknowledge they are interested.
  • Expect to see Barnett Combo (oil) EURs come up some as the results from recent drilling has been "better than expected"
  • Also look for more strong results from their E. Texas Haynesville efforts.

 

ANR Reports Strong Quarter; Guidance Moving Up

The 4Q09 Numbers:

  • Revenue of $893.3mm vs $824mm expected
  • EPS of $0.51 vs $0.45 expected
  • EBITDA  of 199.1 mm vs $183

Highlights:

  • Metallurgical coal demand "appears to be increasing" and they see that trend continuing throughout 2010
  • Bumping up production / sales guidance to meet it; pretty hard to see how estimates will be doing anything but going up,
  • This EPS leverage is compounded by the fact that spot prices continue to move higher and 38% of ANR's expected shipments for 2010 remain unpriced at this time.
  • Entered JV to develop Marcellus gas under their 20,000 acres in southwestern PA.

Conference Call: Tuesday, 10 am EST

CRK Conference Call: Tuesday, 9 am EST. I'm not in the name at present but like to keep up with this cheap one as you never know when they will surprise you.

NE - Doubling Payout + Special Dividend

  • See story here,
  • look for RIG to make a similar move soon, and perhaps for DO to look at increasing it's payout (simply due to its structure and expected better rig rates)

Odds & Ends

Analyst Watch:

  • XCO - upped to Buy at Goldman
  • XEC price target upped $2 to $56 at UBS
  • RDSA raised to Overweight from Underweight at HSBC


 

148 thoughts on “Tuesday Morning”

  2. Whoa… weird! TED is at 14 bps. Basically, since mid-November, interbank lending rates in USD in Europe have stayed stable, but USTs have backed up. This has narrowed the spread.

    TED is good as an overall measure of “risk” in the world. But on a more micro level, one interpretation would be that biz lending (or, at least, lending between banks) has gotten safer while the UST mrkt has gotten riskier. Sadly, that makes sense, in light of the budget deficits.

    But I digress. What TED is telling us is that “there’s no need to panic here, this has no material impact of the global business of doing global business.” We are not headed for a repeat of 2008-9.

    TechTrader is calling for a 50/50 day.

    HeadTrader says “every day is a good day to hunt for opportunities.” So, he’s not going to hit the beach (like TechTrader today).

    Oil up in pre… Iran Jitters? I’ve got to admit, Iran jitters me. They are scary people, talking crazy, and getting closer to having a nuclear bomb. Yeah… that worries me.

  3. BOP – Great TED update, much appreciated. And you can relax a little with regards to the bomb, we’ve probably got 3, maybe 5 years before they have one. In fact, the Pentagon thought about 10 years ago that it would take them 10 years to get one built, so you can…. ooops, wait a moment, drat.

    ANR set to open strong on earnings/guidance.

    That CRK call is at 10:30 EST.

    EVEP doing a deal to pay for RRC’s non core Appalachian gas asset purchase announced yesterday.

    BEXP and MMR indicating better opens with the market and oil but oil is paring gains. SU might be a bottom fish opportunity around here.

  4. Tom – I’ll answer your email in tomorrow’s post, congrats on the NE payout upgrade by the way, stock looking stronger. Everyone looking for RIG to do same.

  5. Talking to a few people this morning… the sense is that traders are still willing to short any rally. So, energy stocks will trade on oil prices… and if Big Scary Stuff is happening in the Middle East, tough to see how oil prices drop much from here.

  6. Pisani pointed out that the Germans are unlikely to approve any form of bailout for the Greeks that Tricet might propose, so the market “rally” here may be pretty short lived.

  7. I don’t think anyone seriously believes that the EU will shovel money in Greece’s direction. However, there are some things that can be done (loosen the bands; set up something temporary with milestones) to help the situation there.

  9. I think 2010 will look a lot like 2004 did. As 2009 was a repeat of 2003. History may not repeat, but it rhymes, as they say.

  10. HeadTrader thinking that with so many people looking to short rallies, he is willing to take the other side of that bet.

  11. TRGL priced 3 mm shares deep in the hole at $8.50. Not a great deal all around as the use of proceeds is potentially marked for repurchasing some 5% debt …. good luck reissuing the debt at that rate.

    BOP, wasn’t 2004 like 1994, the year of the rate hike? Just no fun that one.

  16. #11… i think the rate hike was in 1993… but the damage was felt in 1994 with all those derivative securities tied to LIBOR rates. Then it was embedded options. Now it’s CDS. As I said, it may not repeat, but history sure rhymes.

  17. MMR chart looks to be setting up for a leg up, or at least it halted what could have been a rollover. I’m in BOP’s camp that we very probably get news here later in the week. EXXID speaks next week at Enercom.

  18. My focus this week… do not try to “day trade” the DJ Triad. We could get news as early as Thurs or Friday.

    Of course, the news could be bad. But odds are they will be able to comment on hitting TD and how many feet of pay may have been added by drilling the extra 1,500 ft or so.

  20. CXPO – now at $3.65 despite at least 3 buy ratings initiated around $4 and doing the deal at $5. I continue to await sub $3 for an entry. The name could get a little play this week if EOG is forthcoming on its Eagle Ford efforts, especially if they are focused on the western counties in the play.

  21. #16… nope. Looking at the chart. The rate hike started right at the beginning of 1994. So, you were right, z. And yes, 1994 was an ugly year. But it ended about flat. Like 2004. Like i think 2010 will be. Good history lesson.

  22. Pritchard Capital morning note apparently mentions more good news from Davy Jones possible…don’t have a copy but they are drumming up some interest for us

  24. saw a condensed note from them under Bloomberg news related to EXXID…could see they had a price target of $22.50…

  26. Jivey – got the Pritcard piece, nothing there other than a comment that Davy is a discovery “with possibly more good news to come there shortly”

  28. ANR call notes

    Thermal coal inventories draw in the last quarter “a giant step in the right direction”

    Met coal demand rising, China not slowing, lessor extent growing demand from India.

    ANR one of the few with capacity to ramp delivery.

    Prices continue to rise, delta shrinking between Atlantic and Pacific pricing.

    Met coal shipments guidance of 11 to 13 mm tons for 2010, up 50% from in 2009, 38% of it not yet priced, providing upside to those rising prices.

    Reducing Eastern Thermal coal shipment guidance slightly, but sold out on their Powder River Basin in the high $10s per ton (spot close 10.47 last night)

    Marcellus gas: spud the first of 4 test wells for 2010. $20 mm by each ANR and JV partner Rice Energy. After that they see it funded off its own cash flow. See 100 wells on this acreage over time and then opportunity to add more acres.

  29. Jerome – Can I pick your brain for S&P500 thoughts? Was wondering how low you see it going. Thanks for the CXPO levels, that’s about where I was thinking valuation should be.

  30. ANR Notes

    Met coal in the quarter $97/ton vs $127 a year ago.

    Costs:

    $51/ton on thermal coal in the East, that’s not half bad.

  32. ANR call – very strong so far, I may take a little if the market comes back a bit today. Q&A about to start and will probably wait that out.

  33. TRGL: nice — lol — I did mentioned it was a TUMS stock — lol. At least this has reduced the Oct 2010 liquidity risk of those convert notes. I guess all that takeover talk was just hot air. I am disappointed that nothing came of a possible JV.

    I did buy more this morning, but remember the key to TRGL is IF there is a bakkan type play in the Paris basin and IF TRGL has the money or expertise to exploit that play. These are TWO BIG IFS and it is HIGHLY UNCERTAIN if they can come through. HIGH RISK and high reward spec.

  34. ANR Q&A Notes 1

    Met coal: $150 / ton FOB equivalent, when you look at the high quality tons.

    China expectations – are you seeing any hesitation? NO. Still seeing 8 to 10% growth, especially on electricity demand, for steel the projections they are seeing flat to moderately up.

  35. Should also see better demand on the distillate side with tonight’s API numbers. I know, I know, when don’t I say that of late but with the thaw we had in early Feb and the recent storms and then the number of forecasts calling for the cold to stick around awhile, I have to believe you’ll see heating oil demand pick up substantially as terminals restock and then homes draw that down. People are burning a lot of fuel now.

  36. ANR Q&A #2

    Expect to see the met prices move up gradually from here, they have been seeing higher prices again in just the last few days.

  38. Financials not participating in the rally today, XLF back to almost flat after a small opening surge.

    In the energy patch, oil service outperforming again, still holding my HAL and ATW but not willing to add just yet as everything hinges on the broad market at the moment, despite obviously improving fundamentals in much of the service space.

  39. PXD at HOD, suspicion is people are thinking it gets a boost from EOG comments on the Eagle Ford tomorrow. The quarter was a good one and with it and the reserve report in the rear view mirror, the stock is free to trade on catalysts like having one of the big cap E&Ps say how much they like the play. Should provide legs to ROSE, HK, SFY as well.

  42. UNG trying to hold that base formation triangle, might see some buyers come in at $9.50…

  47. RE: #41, the same technical setup is also developing in the russell, so it’s starting to feel like a bit of a “magnetic” location especially given the “bear confirmed” bullish percent status…and of course there is no way for me to know if the indexes will actually get there, but if they do, and especially if the McClellan gets back down into a severly oversold zone and the S&P remains on a buy in the process, this is a prime spot to look for a reversal…

    $rut charts and comments added….

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

    Re: #44, sunshine, thank you…

  48. Will add a new Eagle Ford summary in tomorrow’s piece with acreage positions for the players, revised thinking on EURs and the exposure vs reserves for each.

  52. Re 50. And here I was trying to be funny with 51. More snow on the way here too, somebody get Al Gore on the line, I need some answers.

  53. Granted, the EU is using very broad, somewhat vague language in their “backing.” So, think the bears will try to put the negative bear-hug spin on it. But, it should be a dead issue now.

  55. Crude topping $73 now, still a few $ short of getting back to where I like it, comfortable nestled in the mid $70s.

    BOP – Re 53 I very much hear you on that. How are spreads looking now?

  57. Fri/Sat we got 13 inches of snow. Now today through Wed we are suppose to get another 10 inches of snow. When you live in northeastern Ohio, the trouble with that is you might not get any weather above 32 for a couple of weeks after the storm. So the snow just sits there and does not melt.

  59. BSJ – do people get to work/school with that much snow on the ground, say by day 2 or 3? Curious if industry just hangs it up for the week or if they get back to work. Down here that would be a game stopper.

  62. V – by the way, went back through my notes on BEXP. They reported the last two wells on Feb 1, have been reporting wells every 3 weeks or so. So maybe we get news next week (a little early) or maybe the next or maybe its just with earnings which I have not seen a release date yet for. They had 1 well completing (assumed completed now) and 4 more waiting on completion for at least the last week, probably longer, so next week it’s still possible. One of those is an extended lateral in the Ross area (their old stomping grounds) and I’m certain that if they get a high IP they will want to run out the press release to say “look at what our new completions can do for us in our old acreage (they have about 100,000 acres in both areas and then 80+K over in their newest area where they have yet to spud a well).

  65. “Risk trade showing signs of life despite a mid day recovery in the dollar”, crude moving on up at well, now $73.50.

    Recall for API tonight, there is a better than even chance we see a smaller than expected build in crude due again to imports coming off, not as high confidence as two weeks ago but its there. And the distillates number could surprise to the upside. Last week gasoline was unexpectedly down due to lack of production and from what I can tell from refining calls, they are going to drag their feet on turnarounds this year (despite spending a lot less on them) and just deliberately keep production of gasoline and diesel low.

  66. RE 61: Gold and silver breaking out because the ECB basically guaranteed that they want to race the US to the bottom with bail outs.

    Re 62: Thanks for the heads up Z.

  68. Re: Re: #58, VTZ, looks right now like BEXP is trying to make a third run at $15.50 resistance…

  69. V – I knew of them and all about them before anyone there was aware of the Bakken and they were, again way back then, very cognizant of their stock price. I doubt that has changed. If I were them I would want to get that news out as fast possible as an “in your face” to the 3+ analysts who have cut the stock on valuation in the last few weeks. 2010 will be an interesting year for them as they are going to need to start showing reserve improvement (with the 2009 reserve report) and production acceleration. They are still a gassy company so the 2009 report may look a little confusing (potential for writedowns on average pricing) but they have basically told the market 4Q to 4Q oil production will be a double and they are going to have to deliver on that, starting with the 1Q10 numbers or the stock will fall back in on itself, high IPs or not.

  71. RE: #61, VTZ, gold will be back into x’s with that print thru 1080…and by the way, the gold miner bullish percent index is way oversold, $bpgdm…

    #63, john11, thank you…

  72. RE 69: For stocks like BEXP, do you find that there is a fair bit of anticipation of PR that drives the stock ahead of time, which is why they often seem to take news in stride or sell the news?

    If you’re right about the stock price monitoring then I can understand the “in your face” to the downgraders to make ’em think twice next time.

    Thanks for the comments.

  73. RE: 59 — This last snow happened over the weekend, so no school closing on Mon. During the storm all stores where open, and so were places such as the library. On a big snow, schools might be closed 1 day, but by day 3 everything would be back to normal. When I went to grade school in the 1950’s they NEVER closed school for snow. I guess I was born at the wrong time — lol.

    So in summary, day of storm SOME business MIGHT let workers early, schools and some businesses might be closed the next day, but by day 2 or 3 everything back to normal.

  74. RE 71: Your read is like many others who are saying that a print above 1080 could push buying into a trading range to find support between 1080 and 1120.

  77. V – on some of them yes, on that one, it seems to fall asleep waiting on a known date (say the pr is coming out soon). So what you have is guys like me playing short term (I own the stock too but that aside for the moment) who buy for the PR, then sell the spike. Some of them hold on longer than their original plan thinking “$16 for sure” and their lack of confidence is then manifested when they sell at $14. It still gets good play on the day of the PR but day 2 and especially day 3 is dicier as an add. The managers that own are going to add after the pullback most likely, not on it, as the name is not exactly what I’d call thin but doesn’t have a monster float either and as such is fairly easy to push around. The sucker also tracks oil pretty well.

    Crude up $2.20 at $74+

  78. RE: 73 — ps — it is very rare where a business would close down because of a snow storm.

    As a side note, it is easier to drive in heavy snow than in a light snow. In a heavy snow, the snow will stop your car if you start to skid. The worst conditions to drive in is ICE. Give me 10 inches of snow everytime than an ice storm or even a little freezing rain.

  80. VTZ – re 76. From the sense that they will be spending more it is not but from a solidarity standpoint, I can see it. Sum of the pieces greater than the whole and all that. It was sufficient to get the dollar index back below 80.

  84. MCF out with report..
    HOUSTON–(BUSINESS WIRE)–Contango Oil & Gas Company (NYSE Amex: MCF) reported revenues from sales of natural gas, oil and natural gas liquids for the three months ended December 31, 2009 of approximately $46.1 million, compared to $45.5 million for the same period last year. The Company reported net income attributable to common stock for the three months ended December 31, 2009 of approximately $19.1 million, or $1.21 per basic share and $1.18 per diluted share. This compares to net income attributable to common stock for the three months ended December 31, 2008 of $18.9 million or $1.14 per basic share and $1.12 per diluted share.

    Full release link…
    http://finance.yahoo.com/news/Contango-Reports-Second-bw-2040739571.html?x=0&.v=1

  87. Re: #70, from here, 1080 puts us back into x’s on $spx…that’s the first nervous point, especially with the macro bullish divergence ever present in the Mcclellan…next resistance zone would be the breakdown retest of 1090-1100, then if SPX breaks above the 20/50 SMA “death crossover” point at 1100, that would make me really worried if I were still short, frankly, given the considerable ambiguity, I’d be out on the reversal back into x’s…and by the way, a print of $1100 would be a beautiful “morning star reversal” type pattern for candle fans (not a textbook formation, but it counts…)…

  88. Sld MMR Feb 15’s at 1.00 for 35% gain over same period, tks JB! Now, If i can get some scuds moving, it will all be good.

  90. Z re 13 I was able to close half the bexp call position at .50. I’m holding the other half for now dca’d at .25

  91. Re MMR/EXXID – still holding calls in anticipation of news. Should see some incremental pay in the last 400 feet of hole as they had no reason to think they were running out of Wilcox sands last time they stopped to look around. Still, could be awhile until we hear, stuck tool risk being high and all.

  93. EOG – Glad to see it catching a relief rally here just before earnings, gives a better shot at taking out $100 within a couple of days of earnings and yet it’s not a level from which people should really be inspired to say that the stock had discounted further good news.

  95. NFX – if you’re in the market for a cheap mid cap name with a chart that refused to break down and earnings next week, well, there ya go. I’m beating on a bottom line beat there on slightly above mid point guidance and good cost control.

  96. Baylor – my thinking there is the close will be pretty important. Ecodata for tomorrow isn’t big time market moving stuff, and I’m looking for a bit better numbers than the Street for the oil report. So if the market closes near its HOD today, I’d bet the bulls come out of the woodwork to keep this from being down week #5.

  102. Z: Not yet. Mail up here a little slow. I will be in Fla. next week, plan to wear (advertise)

  107. RMD – am guessing yesterday was just chart noise in the ROSE, obviously still could be a rumor on their wells out there but I haven’t come across it yet and the stock is up with the group today leading me to the noise comment.

  108. The “sell the rallies” idea did seem to get a bit too popular, too quickly. People looking for a repeat of 2008. My guess is the year is volatile both directions (why is it that market commentators usually mean “down” when they say “volatile”?).

    Now the market is anticipating that any crises will be met with “promises” from someone (Fed, EU=German taxpayers). So the obvious pattern will be “crisis, panic some, bailout, relief rally”. But what will these cycles add up to: drifting up (money printing) or down (debt destruction)?
    Since that question is too hard fro my brain, maybe just try one move at a time.

    I saw Marc Faber comment on the idea of reintroducing the gold standard. He sez sure you can do it, but first you have to revalue gold at a $billon an ounce.

    Iran: rumors (eg on Minyanville) that they will storm an embassy (eg UK). There is something called Revolution Day approaching & I think that’s what all the contradictory crazy talk is about. The Government is worried that the millions on the street will have plans rather different from than the usual celebration of the revolution. So all the anti-Western outbursts look to me like an attempt to distract the crowd from what they may be inclined to do. BOP, I think Iran at the moment would be scary if you happen to live there. Myself, I don’t feel scared by third world countries. I still think that the unrest there could easily percolate into another revolution, which would look very scary on TV. But honestly, your TV can’t actually hurt you 🙂

  109. Explaining the post rally retrenchment:

    German government spokesman says reports about decision on aid for Greece are “unfounded.” (Reuters) S&P down 9 points in two minutes.

  110. Technical curiosity dept: Monster MACD setup in GOOG, but stock barely moving on a green day. GS & BAC also not exactly jumping.

  111. #109 – Oops, someone forgot to actually ask the Germans for the money.

    Germany: “It’s only polite to ask before you take”.

    Rest of World: “Oh dear, it’s come to this: Germany now giving lessons on manners”.

  115. Z: A spokesperson @ HK said they might release numbers 2/24 with no CC. Since they just had one they might not have another. Have they done this before?

  116. Tom – I don’t recall them doing that before but I do recall a few times where they spilled the operational beans just before the quarter (as they have done) and then had little to nothing new to talk about on the call, a call where analysts seemed frustrated to find something new to write first call notes about so it makes some sense. Was it Joan Dunlap that said it?

  117. RE 108: Dman – 1 billion an ounce is Faber nonsense.

    There is plenty of math that says that if you want the USD to be the reserve currency of the world and you want that currency to be backed by gold, then depending on which liabilities you are counting then the number is between 5000 and 12000 depending on who you ask.

  118. Seeing headlines about the Energy Dept delaying their reports this week… guess the massive snow fall in Washington means everyone is out sledding today.

  120. RE 105 – I agree this might actually be bottoming action. I have not added yet and am still pondering.

  123. Both the gas and oil numbers delayed until Friday. And we’re off Monday for President’s day so they will be delayed again next week.

  124. #117 – it’s sometimes hard to tell exactly which level of sarcasm he is using.

    BTW, I signed up with Interactive Brokers. They say their minimum deposit to start an account is $10k. So I wired a “test transmission” of $1k, intending to follow it with $9k to open the account. To my surprise, after the $1k arrived, I got an email that my account was now active and ready to trade. Sign of the times?

  125. skimo #114 interesting article. Looks like chaos, whichever way they move, even *if* we assume that German politicians can act more purposefully than others seem to manage.

  126. BOP- Am I correct that when they say indirect bidders, that the Fed could be a major part of the indirect?

  127. on vacation but had to say something about my favorite stock mcf

    http://finance.yahoo.com/news/Contango-Reports-Second-bw-2040739571.html?x=0&.v=1

    cash flow 40 m or 5 per mcf when ng acg 4.45

    earnings of 1.21 vs 83 last qtr

    since we are at 5.40 earnings for q1 will continue to improve less any write downs for dry holes

    report was light on operational news so i expect that in 3 or 4 weeks as they like to put out something once a month.

    reserves didnt take a hit unlike others in the space with new sec rules

    earnings blew out the 1 unnamed analyst that had a 1 buck for the qtr which was revised from .91

    anyways, happy hour cya

  128. Bill – yeah, wondered if you saw it, not a lot new in there other than continued strong operating metrics. I wonder at the counter normal mindset that puts out a pr like that mid day, kind of own worst enemy in that regard. Stock barely noticed it, up a little more than before but so is the market and volume isn’t abnormally high.

  130. elduque — you are correct. However, i got this answer from Cross-Asset Strategist #1, in response to your question —

    yes…but I thought they had ended…or were ending their
    treasury purchses….would think that an increase in indirect
    bidders is likley central banks that have decided to reduce
    their diversification away from dollars in favor of EUROs or a basket…they just got smoked over the last couple of weeks

  131. I had a look at a few more articles by this George Friedman at Statfor. My conclusion: Iran is far too complicated for anyone in Washington to understand. Same goes for the rest of the Middle East, really.

  132. 128, they continue to undersell themselves

    the 10q is out..cash at year end was 92 m but in today press rlease they talk about current cash in feb at 70 something million

    they have more operational stuff in 10 q, 3 cotton valley wells done ,2 on ,1 coming on soon and 2 more are being drilled. current prod 85 mmcfe per day

    I think he likes being ignored

    no conf call.. oh well

  133. Bill – yeah, deep value, definitely not an options name but who woulda thunk I’d call any Shelf name a value stock (as E&P value goes) ever, lol.

  135. Thanks Jat:

    Crude: Up 7.195 mm barrels

    Gasoline: Up 1.5 mm barrels

    Distillates: Down 1.5 mm barrels

    API saying crude imports down 1%, but that utilization, which is at rock bottom levels fell even further. The numbers don’t work out to a build that big in crude (but APIs numbers rarely make that much sense in a single week’s context) but the direction augers for a build in oil on Friday.

  136. Oil was floating around $74.10 before the number, fell to $73.50 and is trading back up to $73.75 now. Honestly the crude number is the least important number right now, after distillates and gasoline.

  142. Great Macro-Perspective from BedTime Strategist… long, but worth reading
    —————————————-

    Preserving the Reserve.
    It was almost a year ago at the March G20 meeting when PBOC Governor Zhou Xiaochuan floated the idea of creating a “super-sovereign reserve currency” based upon the IMF’s Special Drawing Rights (SDRs). This commenced a chorus of criticisms of the Dollar and Treasuries by Finance Ministers that persisted throughout the year. In June, BRIC nations began to put their money where their mouth is by purchasing Billions of IMF Bonds. Our comment on that development was, “The story about Sovereigns seeking to sell a portion of their Treasuries in favor of purchasing IMF bonds is the equivalent of disbanding your army in favor of the protection of the United Nations. Good luck.” We were alluding to the fact in times of financial/economic stress, nations will do what is in their own best interest. It is an understatement to say that keeping an international coalition currency or bond together is a challenge in such environments. Let’s not forget these are believed to be flight to quality instruments.

    Back in March when the super sovereign story emerged, we noted that “Half of the western world is worried about the Euro holding together through this crisis, which makes it hard to believe that such a drastic change would even be considered now.” That brings us to the current environment and the challenges Greece and the EU face. This is the stress test for how the relatively young European Union and the Euro will withstand adversity. The good thing is that Greece represents only approximately 2.6% of Euro-zone GDP. If the Euro has a problem during this first test, then at least it will be small. The EU is learning how to deal with member nations falling out of line with its well defined standards. Such rules and standards are important, but it is also important to recognize when circumstances are extenuating and the rigidity of rules can cause greater harm than good. The largest global recession in a couple of generations might be considered extenuating. We think the analogy of suspending mark to market in the U.S. last year is a case in point. There was nothing to be gained by shutting the banking system down.

    We have expressed our belief that there is a yield at which investors will buy Greek debt, the question is how steep is the price tag. All of those big bond funds unloading their mortgage backed securities at the tail-end of the Fed’s 15 month buy order will need to rotate money into different bonds. We also suspect that there is a degree of truth to the speculation accusations. It might be smart for the Germans to jawbone both sides of the story (as they did today) just to keep the speculators honest and test their commitment. That risk (sending mixed signals) cannot be taken with a larger economy, but it can probably be taken here. The small size of the Greek economy relative to the Euro-zone means that the situation can be managed fairly easily if real motivation is there. An analogy is the summer of 2008, when Hank Paulson asked Congress for a $300 Billion bazooka to defend the $5 Trillion plus aircraft carriers, Fannie Mae and Freddie Mac. Today, Germany is the $3.7 Trillion Battleship that can defend the $360 Billion Greek yacht if and when it wants to.

    If it were up to us, we would give it some time to see if the speculative flames burn out, but Central Bankers don’t have that luxury. After over two decades of collaboration, the EU cannot let itself or its currency be undermined by the issues of a member that is 2.6% of GDP. It would be the equivalent of permitting a currency crisis in the Dollar because one small state had financial troubles. The latest reports are that the Germans and other EU members may step in and guarantee Greek debt. The key concern is the details of such a plan. Remember, in this country, when it came time to pass TARP, our President’s own party voted against the legislation that was believed to be so vital. One can only imagine pulling an entire continent of nationalities together in a timely manner, if successful it would be an impressive feat. Regardless, a plan similar to the one in which the U.S. Government temporarily guaranteed Bank debt here would seem to be a model.

    Buying and selling the market based upon what the EU and the ECB might do, or might not do, only seems like a recipe for getting whipsawed. Our elected officials in Washington prove that to us on a daily basis (unless it snows, then we get a reprieve). We believe the Dollar/asset price relationship has transitioned to one in which money rotating into the Dollar is being invested in the recovery and the attractive valuation here in contrast to the flight to quality bid a year ago where the flows only went into Treasuries. We continue to believe the S&P 500 is attractive at 13.7x this year’s earnings, and the global uncertainty only increases the relative attractiveness for global investors looking for a safer harbor.

  143. EOG thoughts:

    The 4Q09 Numbers:

    * Production of 2,119 MMcfepd
    o (75.8% gas vs 76.5% gas last quarter)
    o slightly above the mid point of guidance of 2,005 to 2,154 MMcfepd
    o both liquids and natural gas came in above the mid point of guidance
    * Revenue of $1.7609 mm vs $1.327 B
    * Costs: Just over the high end of guidance on LOE, transportation, G&A,
    o LOE of $0.81 / Mcfe vs guidance of $0.73 to $0.77; the 2010 guidance range is slightly higher at $0.75 to $0.80.
    * EPS of $0.92 vs $0.98 … so they missed by $0.06 on earnings and I don’t really care about that as much as cash flow as many things can sway EPS that don’t matter, especially in the fourth quarter like your DD&A rate which gets adjusted when you put out new reserves.
    * CFPS of $3.58 vs $3.47

    Guidance Update

    * 1Q01 – initiated with a range of 2,012 to 2,170 Mcfepd; mid points suggest a continued creep towards higher oil production.

    * 2010 remains the same, calling for 13% organic growth. On the liquids side they are looking for 47% growth, off slightly from the past estimate of 50%, but honestly that’s based on mid point guidance that you could literally drive a fleet of VLCC’s through.
    o 2010 low case 72,000 bopd (25% YoY growth)
    o 2010 high case 99,000 bopd (72% YoY growth)

    Operational Highlights

    Eagle Ford Shale – No mention, zip, nada nothing, we know they are there but they aren’t talking about it, maybe we get more color on the call as they are sure to get asked.

    Bakken

    * Three Forks Sanish test in Parshall Field comes up a winner:
    o Parshall is EOG’s core Bakken stomping ground, to date delivering numerous 2,000+ BOEpd IP wells from the middle Bakken.
    o The Van Hook 100-15H is the highly anticipated Three Forks Test in Parshall and it came in at 1,390 BOEpd. This is one of the higher rates for the Three Forks, with one Three Forks well each from (WLL) and (BEXP) ahead of it and then …. I can’t find a bigger one. Note this is just oil, no natural gas is included in the rate. There are probably some bigger ones that I’m not aware of but there won’t be many.
    o Positive for them and their 500,000+ acres in the play.
    * Bakken Light – three wells mentioned ranging from 370 to 650 bopd (again, no gas included in the rate)

    Barnett Combo

    * Fort Worth Basin gas plant commissioned on schedule.
    * 6 wells mentioned with rates mentioned between 250 and 700 bopd, not as big as last quarter’s rates but still respectable.

    Bossier Shale

    * First test also a highly anticipated well comes in strong for the Bossier
    * The Sustainable Forest 5 No. 2 Alt on the Trenton prospect had an IP of 13 M/d in DeSoto Parish, Lousiana
    * EOG’s thoughts on the EUR here is 8 Bcfe.
    * 5 rig program underway to develop Trenton for both Haynesville and Bossier pay.

    Reserves:

    * up 24% to 10.8 Tcfe, double last year’s reserve growth,
    * all sources F&D was $1.18 / Mcfe, I would have expected improvement over last year but this is much better than last year’s $2.60 / Mcfe AND it takes into account sizable negative price related revisions for natural gas (using average prices for natural gas for last year knocked off 786 Bcfe).
    * This puts the Street valuation of EOG at a rather paltry $2.41 (on a TEV / Reserves basis)

    Balance Sheet:

    * Net debt to total cap: 17%

    Nutshell: Good but not a stand out quarter, would have liked to have heard about their Eagle Ford work but its like them to keep a hat on things while they are still acquiring acreage. The news out of the Three Forks and the Bossier should be taken positively. Guidance on costs may run a little high to the average model leading to some slight trimming of numbers. Valuation remains on the cheap side for the name at 6.6x 2010 CFPS of $14.28 so even if the numbers get a modest haircut it won’t be expensive for what will be likely be the highest growth amongst the 5 remaining big cap domestic E&Ps (and it would be second fastest if you include SWN in that group).

    Conference Call: Today, 9 am EST

  147. Been busy the past few days; trading lightly in this schizo market which is just as well. Scalping where I can.

    I must say I just read that Stratfor / George Friedman piece. What a piece of Crap !

    How does this Friedman bozo get taken seriously (and he is, in some quarters) ?

    He says 3 things in this piece that are grossly distorted and erroneous that he portrays as factual:

    1. The second, a much broader demand, is that “Iran stop engaging in what the United States calls terrorism”.

    What should we call it George ?

    2. The Iranians see themselves as having been quite helpful to the United States in both Iraq and Afghanistan, as they helped Washington topple both the Taliban and Saddam Hussein. In 2001, they offered to let U.S. aircraft land in Iran, and assured Washington of the cooperation of pro-Iranian factions in Afghanistan. In Iraq, they provided intelligence and helped keep the Shiite population relatively passive after the invasion in 2003

    3. ” This is not to say that the Iranians won’t bargain. Beneath the rhetoric, they are practical to the extreme. Indeed, the rhetoric is part of the bargaining.”

    We are talking about the biggest promoter of terrorism in the world; run for 30 years by crazy apocolyptic radical fanatics that are despised by their own people. What on earth is this bozo Friedman talking about ?

    Extreme yes. Practical ? be serious.

    Iran helpful in Iraq ?(arming the resistance and al qaeda; fomenting Shiite vs Sunni violence; killing US troops with IEDs, etc.) and vs. the Taliban in Afghanistan. George is smoking too much poppy.

    Ya think his article ticked me off ?? LOL

    I am sorry for the OT Z, and I appreciate Dman’s link; but this Stratfor piece is just stupid and poor analysis. It reads like State Dept. drivel.

  148. Its good to understand Iran and the conflict there. This piece does not do that IMO. Read Amir Taheri instead or Michael Ledeen or Ralph Peters.

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