Snowy Wednesday

163 thoughts on “Snowy Wednesday”

1. NOG should get positive play out their Stallion well, see above, this one was on the Catalyst list.

   EOG getting market down about $2.50 on the bid at present. See nutshell above. The quarter wasn’t bad but the EPS miss gets noticed (despite the cash flow beat) and the mid point of 2010 oil production guidance shifted from 50% to 47% (despite total production staying the same and the guidance range being huge) will cause some to want to punt. Costs were a touch high as well but oil costs more to lift than gas (in general per unit) so the slight boost in LOE expectations shouldn’t be a big surprise. Lack of Eagle Ford detail could be taken care of on the call but I sort of doubt they’ll spill the beans verbally if they didn’t in print. Still, the call should provide more color there and on the successful Bossier test.

2. If it keeps snowing in DC we may have the week go by without inventory reports.

3. TPH calling the EOG quarter “not good” saying the call will be “double key”

4. Trade deficit much larger than expected, tripping up what were small gains in futures.

5. 5% tax on PA Marcellus Shale NG proposed… … … —

   GOOGed this after hearing Rendell’s state of state message on CSPAN… ..

   HARRISBURG, Pennsylvania, Feb 9, 2010 (Reuters) – Energy companies drilling for natural gas in Pennsylvania’s Marcellus Shale would have to pay a wellhead tax of more than 5 percent under a proposal unveiled on Tuesday by Governor Ed Rendell.

   http://www.reuters.com/article/idUSN0910446320100209

   BUT Oh how times change… .
   Tuesday, September 1, 2009
   Rendell Drops Marcellus Drilling Tax Proposal
   Pennsylvania Governor Rendell is giving up on one the central requests of his February budget address. For months, Governor Rendell, Democrats and environmental advocates have been pushing for a five-percent severance tax on natural gas wellheads in Pennsylvania’s Marcellus Shale formation. The proposal would have also put a 4.7 cent levy on every thousand cubic feet of extracted gas.
   Now Rendell says that tax isn’t going to happen.http://wduqnews.blogspot.com/2009/09/rendell-drops-marcellus-drilling-tax.html

6. MP – not a big surprise, as I understand it they have no severance tax. They passed one here to capture revenues from the Fayetteville Shale and it has not slowed development of the play. With the Marcellus being lower cost (than the Fayetteville) and receiving a higher price per Btu for its gas, I’d expect little damage from that to names like RRC.

7. Bail out Greece… No bail out Greece.
   We’ll help. They have to do it on their own.
   German taxpayers on the hook. Nothing from Germany.
   — What’s a person to believe?

   Our little friend TED continues to shrug all this off and sit on the sidelines at the absolute lows for over 2 yrs. Cash TED Spread clocking in at 14.5bps this morning. Ho-hum.

8. Thanks BOP, EOG about to get underway. They got some splainin to do. I have 5 whole contracts that are going to be toast and I’d like to add lower strikes if they will say the right things.

9. I’m not sure many — in the financial centers of the US — are at work today. Hellooooooooooooooooooo out there. Echo, echo, echo.

   That said, the few who donned their snowshoes and beanies are buying credit today. Indices up (tigher, better). Not gonna freak out about Greece today… not gonna… we shall see.

   IG 101 -1.75bps tighter (good)

   HY 95.5 +1/2 pt higher (good)

   HeadTrader in a Desk Meeting… looking grumpy.

10. Listening to the yada, yada part of the EOG call.

    Thanks for the color commentary BOP!

11. EXXID showed up on the “Biggest Nasdaq Changes in Short Interest vs Float as of Jan. 29″… as one of the Top 25 Decreases in short vs float.

12. EOG 2010

    Essentially identical to last comment, 13% growth , 55% crude oil growth, 28% increase in natural gas liquids.

    See gas prices weak in the first half with stronger gas prices in the second half (same as last view)

    Three Forks – 3 wells
    1,390 BOEpd
    510
    430

    Proves TFS is productive over some portion of our acreage.

    In the middle Bakken, 90 mile step out,

    To date, all of their wells have been moderate length laterals,

    They are not sure which is more efficient (long or short yet) but they drilled one long one with 650 bopd IP (not exactly barn burner but they called in line with expectations.

    Waskada results – doing well, planning oil

    Midcontinent – Cleveland wells, not in pr, 1 at 1,000 bopd, and a second 650 bopd.

    Gas

    Hayensville – 160,000 net acres, see separate Bossier zone with the press release well,

    Marcellus – plan 2 rig program for 2010, consistently getting 3 to 5 MMcfepd IPs

    China – still thinking mid year for horizontal results.

    ….

13. Saw this over on MarketWatch:

    EOG Resources /quotes/comstock/13*!eog/quotes/nls/eog (EOG 90.81, -3.73, -3.95%) shares fell 3.2% to $91.50 in pre-market trades on Wednesday after the oil and gas production company’s adjusted fourth-quarter earnings of 92 cents a share fell short of the Wall Street estimate of 94 cents a share in a survey of analysts by FactSet Research. Analysts at Tudor Pickering Holt said the company didn’t provide details on reserve depletion, or 2010 capital spending. “We worry investors may be frustrated with EOG’s limited disclosure,” analysts said.

14. Cross-Asset Class Strategist — investors are worried, credit rating agencies are worried, companies are buying back their debt (not stock)… but we are not heading back into a Credit Crisis. The fundamentals that support that view are just not there. We are at the start of a 3-5 yr credit cycle… not at the end. But, people are cautious.

    http://www.capmarkets.com/ViewFile.asp?ID1=131422&ID2=391317809&ssid=1&directory=6571&bm=0&filename=02.10.10_I_Smell_Fear.pdf

15. EOG Gas comments:

    914 supply data is too high

    They think the market is tightening

    Oil and Gas hedge position unchanged (they have very little gas hedged and no oil hedged)

    Q&A starting….

16. TechTrader is calling for a 60/40 LONG trade as the best bet for day-traders today.

17. EOG Q&A

    We are drilling horizontal oil wells in the Niobrara and in the Eagle Ford. But still taking in acreage so no comments.

    Big revision on reserves due to prices were due to end of well life gas in Canada. Those come back with higher prices.

    April 7th Analyst Conference
    Just not talking capital or rigs until then. See setting out 2011/2012 guidance.

    Papa doing the one thing that really ticks analysts off … saying basically he’s not answering most questions but deferring them for the April 7 meeting. That means no answers on spending or rigs per play plans.

    …

18. BOP, appreciate the commentary you provide from you and your sources, its very helpful!

19. EOG Q&A

    Haynesville / Bossier. Not looking at two laterals in the same well bore.

    On the Sustainable Forest Bossier well, they frac monitored it and know all the production is from the Bossier, did not contact the Haynesville

    They think about half of their 160K acres in the Haynesville could have Bossier potential under it as well.

20. BossmanG — thank you. That is good to hear.

21. EOG – Papa’s lack of disclosure on the call just killing the stock.

22. EOG – oil ramp is 2H10 loaded because they want to reduce well completion costs by going slow in the winter and then “blitzing it” in the summer in the Bakken.

    They think the uncompleted well concept (holding gas production up as they are completed) has been overblown. EOG doesn’t have a big inventory of uncompleted wells, that’s true, but I know of others who go up into the 100s of wells last fall.

23. NOG moving on $12.

24. EOG Q&A

    Says in the Haynesville they are subscribers to the HK theory that you don’t want to pull the wells as hard in the first year to improve on ultimate recovery.

25. SU downgraded at RBC, btw, to Sector Perform. Analyst duly notes that the stock’s valuation bakes in a lot of disappointment, but he fears dead money for the next few months.

    Asset sale was good, but another fire came out yesterday. It’s unclear what the production impact will be right now.

    If you have any comments, VTZ, always appreciated, know you are a fan.

26. I bot more EOG…that’s my fav f’n co.

27. EOG – doing a really good job of being completely unhelpful on the call. No adds from me here, you might get analysts going both ways tomorrow but it looks like the lack of new information is going to be enough to cool people on it until closer to that April meeting.

    Group a complete mixed bag of nuts today, loosely marking the market.

28. Jivey – me too but he’s just such a stonewall today it’s unreal. It’s getting sold hard here and if it tumbles much more I may have to take a small piece … but again, he’s much more cagey than usual and he’s usually pretty guarded.

29. Jivey – obviously I’m on the fence on it now, love the company long term, wish Mark Papa had woken up on some other side of the bed.

30. EOG

    Re Barnett Combo – don’t read into the list of wells this quarter that we have some kind of degradation in the play.

31. These EOG guys are overly tight with info. Most companies are happy to let you know what savings on projects like oil by rail are. Not them.

32. me too re: the side of the bed thing…he may get himself into analyst purgatory with Stoneburner and his bunch…I only added 10% to my position FWIW…may increase a total of 25% if it continues down, which it looks like it will

33. EOG…P&F trendline support broken, channel line support broken intraday, major resistance now at $95, next major support $81…if EOG can rally back and hold the channel line on the close, this would be one glimmer of bullish hope…bulls need a nice looking closing hammer, showing the they are still holding control…

34. DJ update…we have a week at least. Logging at 29,100′. Plan three seperate log runs after each there is a wiper trip to condition the hole. At 29,000 feet each log run(Drill pipe conveyed) takes about 40 hours. Each wiper trip is about 24 hours so 40+24+40+24+40+24…then you run production casing. Thats better than a week for Team Triad.

35. EOG – time constraint limiting the call to an hour, that’s week, this is your public face guys. Show it. There’s conservatism which I like and caginess which I don’t. I also don’t see the harm in ballparking people on how much acreage they have in some of the new plays if people already know they are in them. You don’t have to say what counties as you are still leasing but are you at 100K or 500K in the EFS. There’s huge interest in the play already so I don’t see the reason not to tell that. Very irritated and I have a tiny position but great respect for these guys.

36. Z: On the August of ’09 CC’s both CHK and EOG were the most bullish re NG production declining. I guess the 914 data has hurt their thinking.

37. Reef- muchas gracias!

38. RE 25: The note echoes all of the reasons why I like it here: a lot of disappointment is baked in already, if it’s dead money then I should have an ok chance to leg into it if it doesn’t perform and if it does then I’ll already have a chunk.

    It’s not an option play for me but a LT hold.

39. Tom- they are both casting dispersions on the 914 data so while they are a bit baffled by it, at least EOG has not, at all, changed its thinking on gas prices.

40. Market spikes lower on Ben saying timing of exit strategy will be data dependent. What a shock.

41. EXXID 10% bonds… forgot to add this to the discussion the other day. The main reason EXXI mngmt may leave these bonds outstanding to maturity in June 2013 is that the 16% notes they issued for the balance sheet restructuring are 2nd liens. 16% + tying up your borrowing capacity against your assets is a lot to pay. Granted the 10s are callable starting June 2010, but think it will be too early to do a re-fi on those. Debt mrkt will want to see the production potential on Davy Jones AND who wants to loan $$ that is subordinate to all those 16% notes, sitting on your head. The 16% notes become callable in June 2011. By that time, we might have some idea of what the Davy Jones Field can do. Depending on the mrkt, EXXI might call BOTH the 16s and the 10s at that point… but, for sure, they are going to want to make those 2nd liens 16s go away ASAP. It displaces bank borrowing capacity (at much MUCH lower costs), so those bonds will be FIRST on the list for EXXI to re-fi.

    Worst case, 10s are outstanding until June 2011, then called with the 16s. Best case, EXXI lets the 10s mature on 6/13.

    Thing is, in high yield land, bonds rarely rarely “mature.” They are either called, the company is acquired and bonds put at 101, or the company goes BK. Seeing the EXXID 10s quoted at 100.25 now…

    Just a few more thoughts on the subject, on a snowy day.

42. HeadTrader thinks you buy any big spikes down today. FWIW.

43. EOG – will be interesting to watch the next 30 minutes or so, if you see a strong recovery, say 50% of the loss you can bet an analyst is pounding the table, maybe one of the Hold rated guys, on his squawk box, and that he comes with positive comments in his note tomorrow.

44. z — what % of EOG’s production is oil?

45. RE 40: Why the hell does that BS even do anything to the market. They should parade me on CNBC every day and I can let everyone know that:

    a) Stimulus/Spending isn’t over anytime soon
    b) Fed purchases aren’t over anytime soon (whether those are masked my Fannie and Freddie or outright)
    c) Lower rates aren’t over any time soon

46. oops… never mind. you answered that upfront, in the morning update. my bad.

47. and d) Fed will not be able to effectively remove liquidity

48. BOP never reads the update Z!

49. VTZ — i do too!!! Stop tattling on me. 😉

50. Market back to needing a daily prozac, dollar rallying on Fed exit comments, sending oil, gold, stocks lower. You have to wonder about talking about a data dependent easing exit at this time.

51. HeadTrader says he doesn’t see nobody doing nothing. Not buying, not selling. Nothing.

52. Logging going slowly… but going, at Davy Jones. May have to wait ’til Monday (assuming no tool gets stuck in the hole) to hear what they think they have, now that they have reached TD.

53. This story is not getting enough attention…

    Greece saga is diverting attention from a much larger story which is the deteriorating relations between China and the US. A Reuters article (that hit @ 11:45amET on Tues) discusses how senior Chinese military officers have proposed that their country boost defense spending and possibly sell some US bonds to punish Washington for its latest round of arms sales to Taiwan. Moreover, David Goldman, writing on the Inner Workings blog at the Asia Times internet site (www.atimes.com) wrote the Chinese government has ordered reserve managers to divest themselves of all U.S. securities that aren’t backed by the implicit or explicit U.S. government (Barron’s).

54. Re 52 – get 8 days based on Reef’s math, not sure when they started but should have been at TD last weekend so I’m thinking mid to late next week if all goes hitchless.

55. SP500 technical update – from JPMo’s Trading Desk – Lift from Fri’s 1044.50 upside reversal day low finally overlaps the 1071.59 Jan 29 low. A step in the right direction, after the interim decline from the 1150.45 Jan 19 peak held the 1043 July 38.2% retr/4th-wave obj, and Jan channel low (now 1031). Short term bullish divergences increase the odds for a complete a-b-c correction. Market becomes more constructive above the 1080 Jan channel high, 1082 Feb 2 62% retr, and 1083 hourly c=a. Significant resistance remains at 1105, 1115 Jan 22 break, and 1130 Jan range break. Keep a 2010 range view: 1000-950 low, 1150-1200 high. Short term bears would reclaim below 1056, for MT support: 1035 10% drop, 1029 Nov low, 1026 Jan-Feb c=a, 1021 200 day MA, and 1019 Oct trough.

56. ZTRADE:

    BEXP – added (5) more of the Feb $15 calls for $0.30 to get to an even (60), just nibbling in a weakish market.

57. z — nope. They have already completed 4 logging runs with different tool sets. The one we really want them to get, the Repeat Formation Testing tool, should be sent downhole late Thurs or Friday. That’s the last tool they will run. So, all goes “right”… Monday announcement.

58. Summary of yesterday’s trading action —

    US stocks continue to be led by developments out of Europe. Reports that assistance for Greece and other countries will be forthcoming helped spark a flurry of short covering for the first part of the day, although this buy demand tapered off a bit into the afternoon. The desk was very quiet for most of the session and stocks essentially flat-lined for much of the afternoon. Larger vanillas aren’t doing much of anything – they continue to be on “buyers strike” although weren’t as quick to take profits on today’s rally given the potential for news out overnight in Europe. Shorts also are a bit nervous about the potential for rally-inducing headlines/developments out of the Eurozone and were reluctant to lay out new positions today. Newsflow is very limited in the US this week (and is becoming more limited as Washington hearings and eco releases get delayed b/c of the snow), leaving our tape focused on, and susceptible to sharp swings based on, exogenous headlines (i.e. Europe). Bulls declaring today a victory in that gains were held into the bell (vs. Mon’s performance) although bears note that we finished off our highs and failed to close north of the technically important 1071 level (which was resistance Mon also). The SP500 and Dow Jones are still neg. for the month of Feb (the Nazz has eked out small gains) and all 3 indicies are down YTD. Volumes were on the light side today (in large part due to the very slow trading of this afternoon).

59. BOP – oh, didn’t get that from Reef’s comment. So they get pressure and fluid with this last and then press release time, again assuming no difficulties.

60. BOP- updated report at drinks last night, these three runs are NEW ones.

61. z #59 — yes. That is my understanding.

62. EOG – not getting any kind of a post call snap back yet, could just be the soft tape, no further buy from me yet.

63. reef — thanks… couldn’t remember 3 or 4. But, knew they were new runs. Anything else spilled over drinks last night?

64. #41-Thanks BOP for your continuing updates-they are very helpful and appreciated.

65. TED a tad wider, at +14.6 bps now.

    IG and HY credit indices back to unch’d to down slightly for the day.

    Whipsaw.

66. Each reistivity run repeats(three so far), better than 20 ohms. Means not knowing Rw is not critical.

67. EOG has filled a gap at 87.05, from Dec. 11…will see if that acts as support of if Papa has literally s*** the bed this morning…maybe…new way to reprice options perhaps….

68. SWN only green on my bloody red screen

69. Reef – that’s quite the kick to the right

70. choices — thank you for the feedback.

    In a lot of ways, the bond market is “smarter” but much less “efficient” than the stock market. Technicals (liquidity, rules and regs) can drive pricing and opportunities to a greater extent in bonds. So, sometimes a bond comes along that says “Buy Me, I’m Stupid Cheap.” Like the EXXI 10s at 84. Sometimes you really DO find a 20-dollar bill on the sidewalk… and it isn’t a trap/joke.

71. #66 — in English, pls. So, that means not knowing the water content is less important? Or, does it maket the RFT run more critical.

72. Z: Papa alway has five things to take away from the call. What where they?

73. DJ Triad — ok. Cleared up some things. z = right (as usual). They are doing 3 more new NEW logging runs, then running the RFT tool. What all this means, and with no problems or delays, is that we should have a final grade on DJ in 12-14 days from now. So, z, put Feb 22-24 as a “milestone” in the DJ Triad table. And cross your fingers that everything goes smoothly. 29,000 ft is a lot of hole to keep running up and down… and a lot of time to keep open (uncased).

74. Reef – they are heat shielding the logs with drill pipe right, I assume they are pretty good at adjusting the resistivity log to account for that under normal pressure heat, any chance they are off by a big factor under this case? Also, I’d guess the RFT is the trickiest one of these to run, correct? So they do it last?

    BSJ – I think he had 4 main points this time, all fairly basic, one was ROCE lead if I recall correctly, basically everything running smoothly.

75. re 73 – just noticed the “right as usual” comment. Looking at my option portfolio at present I have to take issue with you. Ugh.

76. Resistivity tool most hardy, does not need correctioons and has repeated 3 times. All ligs being drillpipe shielded. RFT is always run last because it can get stuck. Reason: it penetrates the formation wall and stays there for a bit(5 min?). If it gets stuck, can then get pushed to both.
    Only tool that cannot be pushed to bottom is density porosity tool. It has an active Radioactive source, and as such is an unacceptable enviornmental risk to the MMS. So you have to fish it out….

77. Thanks for the continuing education reef.

78. NYSE not shutting down early but it’s going to be a ghost town there soon.

79. NYMEX traders have cold feet and still no buyers

80. Consensus for the gas number is now 181 Bcf. Next week’s will be bigger, should easily be 200+ as we have cold diving into the Gulf of Mexico with the potential for snow in NOLA.

    This goes against year ago numbers of:
    164 Bcf (for this week) and
    44 Bcf (for next week’s comp)

    So we should be at or below 2 Tcf in storage by next Thursday with more cold dragging us toward a pretty supportive end of season 1.5 Tcf.

81. RE jat/SU: I just got an update from friends at Suncor about the fire and the rumored repair time for the Feb 9 fire to the Coker feed pumps is up to 4 weeks. This could cut up to 125,000 bpd for the entire duration of the repair.

82. RE 81: Keep in mind this is a separate fire to the December fire to the other cokers.

83. Accuweather seems to think the next 30 days are cold, will make that sub 1.5 number a lock

84. for a contrast to EOG go to SSN. Press release every other day on their one well. Price on this penny stock up 36% today, fwiw.

85. Reef – that’s what I’m thinking. Liking my subscription to the pro site, Bastardi has been pretty right this winter and he’s talking cold well into March.

    Skimo – yeah, that’s about 180 degrees, but also a house of cards. Silly little Aussie company will pr when they take coffee breaks next.

86. Wonderfully Ironic Watch: Gazprom, the Russian Oil& Gas behemoth, is canceling their New York Investor Day because of too much snow. This is like if Tropicana canceled a meeting because of too much sun.

87. VTZ, thanks for 82. This is going to make for an even dirtier Q1/Q2.

88. Afternoon all. Not a lot to add to the comments Z put up above for me. I do think we are in a sideways wave iv correction. Playing out as an ABC. We likely saw B down this morning and are now starting C back up. Keep an eye on gold as its leading the SPX imo. Short term we need to get above 1070 on the spx to confirm this next move up. At the moment we have 3 wave moves all over the place which is just corrective. If we can move up then I see resistance at 1083 and then between 1090 and 1100. That area may cap this rally and lead to another wave down.

89. adidos-leaving for Houston and NAPE

90. Thanks Nicky, I’d that oil seems to be leading too.

91. Reef – happy hunting, lemme know if you hear anything interesting.

92. V – dollar trying to rollover here, helping crude and the market.

93. Yes Z agree. Its just that gold is almost perfectly mirroring the spx price. Leading it down, then leading it back up again etc.

94. Group starting to slowly green up and oil trips into greenland.

95. RE 92: The euro short position is the largest ever I believe so that has to turn at some point?

96. jat – If you ever want updates or opinions, just ask because I usually get nuggets of info from folks but I’m not always sure whether or not anyone cares.

97. Thanks for 96, am always interested. Z can certainly give you my email. I got a call from SU IR this morning, seems like they’ll still be providing some bitumen so not sure if it’s going to be a 125k barrel impact total or what.

98. Parts of PA to get 10 to 15 feet of snow. Talk about freeze offs in the Marcellus.

99. Jat – do you see this story on HAL amending by by-laws on who can call a special meeting, not sure who could call one before, would think they would make it harder to do?

100. Re HAL – went back and looked, they had no special meeting level before but the board was against it. Now a 10% holder or 2 or more holders with 25% can call a special meeting. I show biggest holder is Blackrock at 7.2%

101. I see it. There’s also an 8-K filed with the SEC. I’d need to find the old by-laws to do a comparison.

     Doesn’t really impact my thoughts here much. Never seriously thought of HAL in any takeout scenario and some sort of massive returns of cash would be just gravy to me.

102. 98: that’s inches, not feet. An hour ago it was rain/sleet, snow in Phila., now it is snowing hard, with heavy thick flakes which are piling up fast. Windy, but this won’t drift much.

103. So what do you think of the new rules?

     My thoughts on HAL are pretty simple. You have a stock flat where it was in October despite the fact that the rig count has increased 30% and they are getting pricing while 2010 consensus estimates have moved a whopping $1.37 to $1.40. I understand that international will see the impact of early 2009 pricing concessions, but that’s done with by Q2.

     IMO, HAL is a lot higher from here by June, otherwise line up some of them hats for me and a big fork.

104. 98: feet?

105. RE 97: If they can’t get a replacement pump/spare going they are likely just going to try to hide the production loss through product blending although they’ll hurt they margin/bbl even if they don’t lose the entire volume. It would be more for investor aesthetics than actual earning power although it would help a bit.

106. Jat – I was thinking maybe they call a meeting to discuss that buyback issue, or some other return of cash. And I whole heartedly agree with your flat stock vs up and to the right rig count comment.

     RMD – my bad, rolled it back, they were talking about what their latest snowblower equipment could clear and the weather girl said that would be a sight to see.

107. VTZ, your updates and opinions are MUCH appreciated. This site is a wealth of valuable information.

108. Re 105, I am all for investor aesthetics with the Rick George show right now.

109. 106: i us. JB didn’t say anything because he’s out shoveling.

110. Reef, if you need any help or local advice in Houston, let me know. Happy to help out.

111. Last on HAL – I have the name bouncing off the 200 ema four sessions ago, having fallen through the 50 a week before that on general market worry. So nobody paying attention as rig counts keep running up.

112. Pati – I think so too, thanks for the comment.

113. Oil zipping higher now, up 80 cents, hmmm.

114. I don’t buy the dollar rally from here concept, just too many headwinds and when the smoke clears in Europe, they will look more united re policy than the United States. Initial reaction to a bailout for Greece was opposite of what many expected with the dollar falling, not rising vs the Euro. I think that’s telling. Plus, the dollar has had a huge run technically and has been moving higher on the concept that easing will ease. If the numbers don’t start improving soon I think the Fed extends some of its soon to expire programs. I admit, I’m no bond or currency wonk, just a junior Fed watcher but that’s my read for now. Dollar strength is technical and little more. When you see Australia raise rates, and then others, I’d look for the dollar to roll the heck back over.

115. MIDDAY OVERVIEW

     · Desk Color – another relatively quiet session today; earnings are really starting to slow down and the names that are hitting don’t have the ability to really impact the broader tape (unlike banks, etc). This week is very light on the eco front as well while the East Coast snowstorm is impacting newsflow out of Washington (and its also impacting volumes/attendance on Wall St). Stocks were freaked out initially this morning immediately following the Bernanke text release (hit @ 10amET) on talk of hiking the discount rate, although have recovered from their lows as the Fed outlook was really very much as previewed (the “low for long” line was reiterated and if anything the timing on Fed balance sheet shrinkage was a bit longer than anticipated). Greece remains top of mind and despite a headline hitting on this topic every 5 minutes, there hasn’t been a ton incremental out this morning (see below for update). Desk pretty quiet for the most part. Shorts not as anxious to cover today as they were Tues although aren’t really laying back out new positions either. Vanillas not doing too much (as has been the trend for last few days). Technically, bulls disappointed we couldn’t close north of 1071 yesterday while bears don’t have upper hand until sub 1056.

     · Equity Sectors – commodity-linked groups weak today as the US$ catches a bid on back of Bernanke’s comments (which are being perceived as hawkish). Materials and energy are both off 1% on the day. EOG off 6% post earnings and is the weakest energy stock. Materials stocks being led lower by the metals (in addition to the dollar, MT’s disappointing earnings are also weighing); MT is off 8% today while ATI, X, TIE all fall 3%. Tech, health care, discretionary, utilities, and telecoms are all off 0.5%. Financials are leading the market higher (up 0.5%), w/banks accounting for the bulk of the strength. Media stocks dip 1% following a bunch of earnings releases (NYT -6%, DISCA -3%, SNI -4%, DIS -1%).

     · Technicals: Short term bears would reclaim below 1056, for MT support: 1035 10% drop, 1029 Nov low, 1026 Jan-Feb c=a, 1021 200 day MA, and 1019 Oct trough

116. Some thoughts from the FOMC notes, from a major i-bank

     Fed highlights – Bernanke exit policy announcement pretty much inline….the comment about raising discount rate “before long” spooking people, but on the whole this speech about as previewed; reits “low for long” re fed funds. Some highlights:

     · the Federal Reserve is in the process of normalizing the terms of regular discount window loans.

     · The FOMC anticipates that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. In due course, however, as the expansion matures the Federal Reserve will need to begin to tighten monetary conditions to prevent the development of inflationary pressures. The Federal Reserve has a number of tools that will enable it to firm the stance of policy at the appropriate time.

     · One such tool is reverse repurchase agreements (reverse repos), a method that the Federal Reserve has used historically as a means of absorbing reserves from the banking system. As a second means of draining reserves, the Federal Reserve is also developing plans to offer to depository institutions term deposits, which are roughly analogous to certificates of deposit that the institutions offer to their customers.

     · I currently do not anticipate that the Federal Reserve will sell any of its security holdings in the near term, at least until after policy tightening has gotten under way and the economy is clearly in a sustainable recovery. However, to help reduce the size of our balance sheet and the quantity of reserves, we are allowing agency debt and MBS to run off as they mature or are prepaid. The Federal Reserve is currently rolling over all maturing Treasury securities, but in the future it may choose not to do so in all cases. In the long run, the Federal Reserve anticipates that its balance sheet will shrink toward more historically normal levels and that most or all of its security holdings will be Treasury securities

     · Accordingly, the Federal Reserve is considering the utility, during the transition to a more normal policy configuration, of communicating the stance of policy in terms of another operating target, such as an alternative short-term interest rate. In particular, it is possible that the Federal Reserve could for a time use the interest rate paid on reserves

     · before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate

117. Thanks BOP – market has that buy the dips but run out of steam when you get back to even kind of feel to it.

118. The sell off this morning, on the Fed notes, was stupid. But Mr. Market will do, what Mr. Market wants to. If people want to be afraid, the Bears are more than happy to accomodate.

119. Agreed. Ben basically saying we will at some point raise rates. Not now. Again, shocking.

120. Just wait until the Bears start pushing on Municipal Bond CDS… with the over-leveraged balance sheets and spending addictions by our States (who — unlike the idiots in Washington — are required by law to balance their books) are setting them up as Bear-Bait. Not seeing it yet… but, that will probably be the Next Big Scare. At some point, anyway.

121. adding to #120… not to mention the completely asinine retirement promises states have made to their public sector employees.

122. NOTHING against public sector employees, by the way. My aunt is a school teacher and my cousin is a fireman. But, there were a lot of promises made and pension metrics set up that do not make any sense, whatsoever. Rant over.

123. NOG working higher, up 5% on its news.

     EOG not working at all, holding near lows

     MCF getting a little follow through today but still short of where it probably should be given cost control, higher return on capital there.

     Everything else just kind of squishing around, someone doing a little buying in SWN all day.

124. re: 120-122…I had just commented to someone here at the office about public pensions & how fat public sector jobs now looked vs. private sector….something always greener…glad I’m old and will be quitting soon…

125. New Long Ranger from Bastardi – saying as cold and nasty as it is now, colder weather may be on the way for end of Feb and early March.

     Says we get a blast of Siberian air into Canada and then spilling down into the states in 12 to 13 days.

     The Eagle Ford Shale stuff will be added to the EFS page on the reports tab.

126. Sitting on hands on trades at the moment, market too iffy.

127. OPEC cut global demand by 10,000 bopd earlier for 2010, to growth of 810,000 bopd but sees a higher call on its own crude.

     EIA, though closed today, managed to release their Short Term Energy Outlook.

     They see higher oil prices in the second half due to recovery in the global economy.

     They also better prices for natural gas this year ($5.37) and next ($5.86). Due to the weather we’ve been having they cut their end of March storage number from 1,734 in their last STEO to 1,644 Bcf in today’s report. I still think we have a good shot at dipping below 1.5 Tcf.

128. Crude closing up about 75 cents at $74.50. I would not expect to much of a move tomorrow in front of EIA on Friday but we should be seeing more support from heating oil soon with all this cold. Unless people are just wearing snuggies, the cold has to translate, at some point, into higher demand and, taken in light of really low refiner make of distillates, that’s got to translate into falling distillate inventories. Prices have recently fallen sharply here with oil so we could see a large snap back when the demand does hit.

129. somebody becoming a bigger KOG’r the past few mins

130. KOG — wonder how that Peak Energy (private company) is doing with their TFS completion, a coupla miles west of KOG’s FBIR acreage… KOG and Peak have a data-sharing arrangement.

     But, ain’t NO SECRETS amongst the Bakkens.

131. #120 – Since this is a solvency crisis and not a liquidity event, the most eloquent solution is a simple repudiation of some metric of principal, say a 50% haircut. Memory being short the debt holders will all be back in time. And, asinine retirement promises states have made to their public sector employees will have an outside shot at being honored. And, its an immediate boost to discretionary cash flow. Something any politican can appreciate..hee..hee. So, I’m moving over to Marc Faber’s thinking on this. He says that all will do this and while a dishonorable path i can certainly see how he gets there. Rant on.

132. #131 — Greece is trying that tactic. Getting a massive public sector strike in return today. Guess the Greek Govt needed to so a little more ‘splainin’ to the masses. Like, we’re going broke… be glad you have a job at all.

133. “we’re going broke… be glad you have a job at all.” ~ that could go on a lot of state license plates these days.

     NOG up only 4.6% now, not an expensive name before this well, but am a bit surprised it isn’t making a run on $13 and then the old highs here. Some folks wanted a bigger IP out of that 36 stage well.

134. Bill – your MCF finally getting some respect.

135. SWN cutting up through its 200 day today, sort of interesting after the dip it’s had, anything to it doing that with the RSI turning JB?

136. Re: #135 SWN, that daily “doji hammer” on 2/5/10 reversed SWN right at P&F trendline support…and depending on how you draw it, in addition to holding above the 200 day SMA it’s also back into the channel…I’ll try to get a chart up later…power problems late this afternoon, weather related…

137. Thanks JB, that’s all I needed, was noting it pop through the 200 day with higher lows on a pretty short term RSI.

138. EOG – actually, I should soften some of my earlier comments, screen didn’t update but many of the well count comments people were asking for are in the new presentation for today.

139. Beerthirty, other than EOG (which was small) not a bad day considering the broad market’s lack of direction. BEXP closed essentially flat and the chart there looks constructive to me in front of possible news in the next 2 weeks.

     MMR / EXXID same comment as above.

     NOG – I think that moves on up as well, a litany of small working interest wells to announce on the quarter.

140. From HeadTrader (he thinks this is very bullish) —

     Although the S&P 500 is down less than 7.5% from its January high, bulls are heading for the hills. According to Investors Intelligence, bullish sentiment among newsletter writers is currently at 34.1%, which is the lowest level since March 2009. At the same time, bearish sentiment (26.1%) is the highest since November, while the percentage of newsletter writers in the correction camp has sky-rocketed all the way to 39.8%, which is a level that hasn’t been seen since 1983.

141. Thanks BOP, any idea when they released those figures?

142. LOOKBACK

     Equity Levels: SP500 dips 2.3 points/0.2% to 1068; the Nazz fell 0.139%; the DJIA fell 0.2%.
     Desk Color – volumes/activity VERY quiet all day, esp. into the afternoon (the pace of trading today rivaled some holidays). Combination of quiet corporate/eco newsflow and the NE snowstorm made for a non-event session. There was an important release from the Fed/Bernanke discussing exit strategies that caused a brief scare (due to the remark about raising the discount rate) but upon further review the commentary was very consistent w/expectations (“low for long” reiterated re the Fed Funds and balance sheet shrinkage wouldn’t occur until a recovery had taken hold). There were some big movers among smaller/mid-cap stocks following earnings (DF, CCE, WYN) but most of the market’s largest companies have reported at this point. On the Greek front, investors have been bombarded w/myriad headlines for the last 48 hrs (nearly everyone contradicting its predecessor it seems) and are starting to be tuned out (hopefully there will be a definitive statement from the EU and/or France+Germany to provide some clarity). In terms of trading flow, hard to read much into today’s patterns. Larger vanillas pretty much inactive (as has been the case for a few days now) while short-term HFs also not doing much of anything. On a technical basis, people looking for a break either north of 1071 (we have failed to hold above this level for a few sessions now) or south of 1056. The most notable action occurred away from stocks today as US TSYs sold off following a weak 10yr auction.

143. HeadTrader is not sure… he admits, he saw it on “Seeking Alpha” today.

144. Thanks BOP – that has been a good contra indicator in the past.

145. That is why he shot it over to me. He was pretty jazzed up to see it.

146. HT just checked… survey came out today.

147. Here’s the article

     http://www.businessweek.com/news/2010-02-10/predictions-of-stock-plunge-reach-26-year-high-survey-finds.html

148. SWN charts and comments added…a few updates to TRGL, EOG, HK, ROSE…

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

149. Thanks JB, will check it out.

150. Nice charts Jerome …

151. Thanks, Jerome-a lot of work and insight going into these charts.

152. Voted

153. Dollar index weakening up again tonight, not far from session lows.

154. CXPO – off another 7% today to $3.40, I get more interested around $2.75 to $3.00, plus by then we should be closer to some stock moving catalysts.

155. Ok, just got through all the charts, good work Jerome.

156. BedTime Market Strategist —

     Frightful Weather.

     We don’t know which was worse today, the weather or that quick selloff in futures. Surprisingly, the release of Chairman Bernanke’s prepared testimony prompted the markets’ biggest moves of the day. The Fed Chairman alluded that the Discount Rate will soon be lifted and the market’s quick reaction was an indication that investors are still tentative and itchy trigger fingers prevail. While the Discount Window is often viewed as symbolic, its influence on the economy is minimal. Traditionally, the Discount Window was the Fed’s lender of last resort facility. Earlier in the decade, the Fed attempted to revamp the window, splitting it into primary and secondary credit with primary credit borrowers perceived as healthy and only secondary credit borrowers having problems. The plan never really worked and until this crisis, the primary use of the Window over the past 20 years was for seasonal borrowings by banks in agricultural communities. Even as this crisis erupted, banks did not want to use the Window. In August of 2007 when the credit crunch commenced, there was that brief superficial and artificial demonstration of solidarity when, with the Fed’s encouragement, all of the banks borrowed. The solidarity did not last long and the Fed eventually wound up creating the Term Auction Facility (TAF). Instead of waiting for the banks to come to the Window, the Fed brought the Window to the banks through the TAF. Lehman’s failure sparked real Discount Window borrowing which peaked at $430 Billion in October 2008, and has subsequently worked its way lower to $89 Billion today. The TAF, which launched at the end of 2007, peaked just shy of $500 Billion almost a year ago and has wound down to $38 Billion. The Discount Rate was kept 100 basis points above the Fed Funds in the years prior to the crisis and is currently 25 basis points above the Fed Funds. Chairman Bernanke noted today that the Fed will be looking to start re-establishing the spread or as he called it “normalizing” Fed lending facilities. Although this interest rate is going up, “interest rates” as the market and economy care about them are not going up yet.

     Foreshadowing, Telegraphing, Broadcasting.

     The Federal Reserve definitely wants to stay on point and on target with its message. As far as the exit strategy is concerned, the Fed Chairman did not say anything new today that he has not already said in the past, or which has not already been leaked to the media. Evidently, the Fed wants to make sure that its intentions are well telegraphed and that its message is clearly delivered to the markets. The Chairman reinforced the fact that Fed policy has not changed since the January meeting. For good measure, he used the language of the FOMC statements verbatim. “The FOMC anticipates that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Despite talking about the exit strategy, Bernanke also noted that the economy is still weak. “Although at present the U.S. economy continues to require the support of highly accommodative monetary policies, at some point the Federal Reserve will need to tighten financial conditions by raising short-term interest rates and reducing the quantity of bank reserves outstanding.” In discussing the logistics of the exit strategy, he highlighted the same mechanisms he noted in his October 8th speech, The Federal Reserve’s Balance Sheet: An Update. The mechanisms are: Interest on Reserves, Reverse Repos, Time deposits for Banks and eventual Sale of assets, if necessary.

     The only notable development was the Fed Chairman’s official shift to highlight the importance of the Interest Rate on Reserves. This is not new and many thought this would have occurred during the last FOMC statement but the Fed waited. This, along with the intention of normalizing the Discount Rate, is the likely reason the Fed Chairman wanted to ensure his testimony was released today even though his appearance was postponed. Although the Chairman intimated that different actions could be taken dependent upon market and economic conditions, his statement about tightening was very straightforward. “The actual firming of policy would then be implemented through an increase in the interest rate paid on reserves.” This is the transition to notify the markets to watch the Interest Rate on Reserves (or Excess Reserves, depending on what they officially call it). The Fed Chairman has now officially prepared the market to use the Interest Rate on Reserves as the new base rate for the economy.

157. Re 156. Isn’t it nice when people put things in perspective … it just sucks the hysteria right out of the room.

158. Here’s some stuff on Iran from today that are a marked contrast from that horrible Stratfor piece:

     First: Amir Taheri

     http://corner.nationalreview.com/post/?q=NTc0MWJmODBiYzJlODRlNWI0NDEzNDgyNzUxYmI5NWI=

     And comments from Charles Krauthammer:

     And when he spoke about a regime of sanctions, I think it was important. I think what that means is an array of them. I think he understands that out of the Security Council he will get almost nothing because China will water anything down to the point where the sanctions are meaningless.

     However, I think strategically you want to get something out of the Security Council, even if it’s weak, as a way to legitimize unilateral sanctions by the Europeans and the Americans, perhaps EU-wide, perhaps only the French, the Germans, the British, and us — which [sanctions] would bite.

     Now, the problem with the administration is Obama still speaks of isolating the regime with the sanctions. I mean, that is so absurd. This is a regime — after 30 years [of taking] over an American embassy and kidnapping its personnel — it accepted isolation a long time ago. It’s not an issue, isolation.

     The point of sanction is to punish and to squeeze. And it’s not as if the squeezing and punishing will change the policy of this regime. It won’t. What it can do is to increase the crisis in the country in which you have got simmering and really volcanic anger against [the regime].

     You want to heighten the contradictions, as Lenin would say, and help along a revolution if possible. That’s the reason you want sanctions, not that it’s going to change the regime’s behavior.

159. The Fed has no exit strategy …

160. Hang Seng up a 1.5%+ and back over the 20,000 mark as benign Chinese inflation data are reported on the consumer side (no matter how you feel about the quality of the data)

161. Re: #149, #150,#151, #152…Zman, PackMan, choices…thanks much for the comments and votes…

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