12
Feb

Data Deluge Friday

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Market Sentiment Watch: U.S. futures hit the brakes early this morning China decided to hike their banks' reserve requirement by 50 basis points for the second time this year in an effort to cool growth. China did this after their markets closed and in front of a week long holiday for their New Year. Following that trick, European GDP was unimpressive from Greece to Germany and as such the dollar is soaring to new highs for this cycle. Crude and other commodities are slumping in face of this Friday triple whammy (anticipated lower Chinese demand, an even higher dollar, and slumping U.S. equity futures). I have resisted adding to positions as the S&P has come off its lows and I think that I will stay in the mode until the market finds better footing in coming weeks. I have little doubt that China's move prior to a holiday is meant for maximum impact and that China growth plays like the coal sector will be available at more bargain basement prices soon. So that's the state of the markets with a little over two hours to the opening bell. 

  • Eco Data To Watch For The Rest of the Day Watch:
    • Retail Sales:  Came in at 0.5%, (0.6% ex autos) vs a forecast of 0.3% and 0.6% respectively.
    • December Inventories are due at 10 am EST (forecast +0.6%)
    • Consumer Sentiment, also due at 10 am EST (forecast at 75 vs 74.4 last reading, this one can swing the market)
    • Natural Gas Inventories at 10:30 am EST
    • Oil Inventory Report at 11:00 am EST


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - ATW, UPL - earnings very strong
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $13,500
    • 21% Cash
  • Yesterday's Trades:
    • None - soon though.


Commodity Watch:

Crude oil rallied with the market (and against the dollar) adding $0.76 to close at $75.28 yesterday. This was crude's third close over $75 this month and the chart has firmed considerably since last week's sharp, dollar and broad market inspired declines. This morning crude is trading off $1.30 for all the reasons listed in the opening paragraph but we do have inventories to consider later this morning.

Natural gas bounced a dime to close the day at $5.40 yesterday as estimates for today's EIA storage report continued to drift up. This morning gas is trading down a couple of pennies.

  • My Number:  190 to 200 Bcf based on gas-weighted heating degree days of 225.
    • Imports: 10.5 Bcfgpd vs 9.6 Bcfgpd in the prior week and 9.5 a year ago.
    • Historical Comps:

      • Last Week: 115 Bcf withdrawal.
      • Last Year: 164 Bcf withdrawal.
      • 5 Year Average: 166 Bcf withdrawal.
      • 10 year Hi: 68 Bcf withdrawal.
      • 10 year Low: 254 Bcf withdrawal.
  • Street Consensus: 183 Bcf Withdrawal

After this week the Year Ago Comps Get Much Easier:

  • 44 Bcf
  • 90 Bcf
  • 101 Bcf
  • 111 Bcf
  • 42 Bcf
  • 1 Bcf
  • end of 2009 withdrawal season - March 26, 2009

We're at 2,406 Bcf in storage now, and I'm estimating we clip 900 Bcf from that total over the next 6 weeks or an average of 150 Bcf per week through withdrawal season end, arriving at 1.5 Tcf which as you can see from the chart below could be worse.

 

 

Oil Inventory Preview


 

ZComment: API showed a big, utilization related, build in crude stocks so the market should be expecting the potential for a bigger than normal crude build today. Last year we actually saw a 4.7 mm build in crude stocks so even a crude build double the size of the 1.6 mm barrel expected will yield a continued increase in the YoY deficit which is already in pretty good shape. If we actually hit the Street estimate of 1.6 mm barrel swe will erode the surplus on the 5 year average as well. But the thing people really want to see is a boost in distillate demand and significant decline in distillate inventories. While we should see further follow through on heating oil demand, the winter storms are murder on diesel and jet fuel demand. Gasoline should be a given as down as much of the country was busy going nowhere. Note to the Administration: want to get off foreign oil: calculate how many people were snowed in and figure out a way for small business at least and some in the info services sector to telecommute more often ... you could save a lot of gasoline.

Stuff We Care About Today


ATW Announces Unexpected Downtime for the Falcon

  • This is one of the dangers of holding a smaller operator vs a larger one. With the larger fleet operators like RIG, DO, NE 1 rig, if down for a short amount of time, is likely to have a barely noticeable impact on earnings. When you have 9 rigs (going to 11) having one rig down, especially one of you higher capability rigs, that garner higher rates, is likely have a material (if fleeting) impact on earnings.
  • ATW has the Atwood Falcon down for unscheduled repairs for two to five weeks. It will earn a $0 rate at that time vs normal revenue of $425,000 per day while costing about $85,000 a day to operate.
  • Impact on this quarter's earnings is expected to $0.15 to $0.30
  • The Street has this quarter's earnings at $1.02.
  • If the stock gets marked significantly lower I will look at adding March calls.

UPL Reports Very Strong Quarter; Raises Production Guidance

The 4Q09 Numbers:

  • Production of 47.632 Bcf (96% natural gas) which was above the upper end of guidance for the quarter by 3.1 Bcfe
  • Revenue of $213.3 vs $237 mm expected
  • Cost: Much better than expected. Forward guidance is for continued strong cost control.

    • On a per unit basis LOE, Production taxes, gathering fees, transportation expenses, and G&A all came in significantly below the low end of guidance due to the production beat. 
  • EPS of $0.51 vs $0.47 expected
  • CFPS of $1.12 vs $1.04 expected

Highlights:  This is a two horse show for those of you not familiar with the name: Pinedale Anticline gas in Wyoming and a nascent but rapidly growing position in the Pennsylvania portion of the Marcellus Shale

  • Wyoming:
    • Planning 110  net wells essentially flat with last year.
    • drill times / costs continue to fall. Like other shale players, UPL continues to squeeze down spud to TD times - see table in press release but essentially days to drill has fallen from 24 in 2008 to 20 in 2009 and some wells have hit total depth in 11 days.
    • Meanwhile, EURs continue to exceed pre drill estimates
    • They also have a good table showing the permanent tightening of Rockies gas basis differentials vs last year with the completion of the REX pipeline. Historically, Rockies gas has been severely discounted to Henry Hub because their was too much gas and not enough pipe capacity to get it to market. With REX, UPL is getting Rockies gas to market at a 5 to 7% discount to Henry Hub vs a 20 to 30% discount in the past.
  • Pennsyvania:
    • Planning 70 net wells this year, up from 22.5 net wells in 2009.
    • Results continue to support a 3.75 Bcfe type curve with an average cost to drill of $3.5 mm.
    • They believe their 2009 program substantially derisked their growing acreage position.
    • Acreage in the play is up from 249K vs 152K net at the beginning of 2009.

Production Guidance:

  • 2010 - 2012 - they see 20% production growth per year.
  • This is an improvement on the previously stated 2010 and 2011 production outlook of 15 to 20%.

Hedges: Unchanged

  • 2010 at 98.3 Bcfe @$5.49 / mcfe, unchanged from last quarter's read. This is about 45% of expected production.
  • 2011 at 73 Bcfe @$5.61 / mcfe, unchanged from last quarter's read. This is about 30% of expected production.

Valuation:  Current forward P/CF remains elevated at 8.6x for the group but I think deservedly so.

Nutshell: This may be the only bit of green on your screen today. The results are the best I have seen from the group this quarter as is the outlook. The premium to the group in my opinion is well deserved at this time. This is one I track but don't often traffic in. That will change in 2010 as the superior performance on production and costs and the superior margins afforded by better gas price realizations on an income statement that is partially protected to downside price risk is getting more of my attention.


Conference Call: Today, 11 am EST

 

Odds & Ends

Analyst Watch:

  • ECA - upped to Buy at Canaccord
  • PVA - upped to Buy at SunTrust

 

175 Responses to “Data Deluge Friday”

  1. 1
    zman Says:

    Analyst Watch: SWN started at Morgan Stanley at Overweight, target way up at $60. Too bad they picked a Friday, with a pretty ugly futures tape to do that on.

  2. 2
    BirdsofpreyRcool Says:

    TED Spread Ticked up this morning as treasury yields fell and LIBOR stayed flat (the spread between LIBOR minus Treasury yields got wider). TED is telling us 15.6 bps today (up from yesterday’s 14.6) and off the low of 14.3bps that occurred just 3 short days ago. TED should be around 18-20bps in a “normal” year… so why is it so tight? Don’t know exactly. Banks seem to be awfully comfy, lending to each other (the LIBOR rate). Maybe they know that banks aren’t lending… maybe the loans banks ARE making are super-top-quality. But, TED is still telling us, “nothing out of the ordinary going on.”

    Stock futures are telegraphing something else. The NUMBER 1 concern of equity portfolio managers (and probably the global market in general) is CHINA. China’s Central Bank raising reserve requirements by 50 bps is not scaring the commercial lending market, but it is scaring stocks. This allows the Credit Bears to push their positions a bit more (and make a little more $$ today).

    Still, not seeing TERROR in the Credit indices this morning either.

    IG + 1.74 bps

    HY -9/16 pts

  3. 3
    BirdsofpreyRcool Says:

    You gotta love Tech Trader… he’s so cool. Volume has just been too light to have any conviction in a direction. So, he’s taking Friday off.

    HeadTrader is already thinking about the (long) weekend.

    The rest of the mrkt is thinking about CHINA.

    Could be an ugly open, low-volume day, flat close ahead of the weekend and Chinese New Year. We shall see.

  4. 4
    zman Says:

    UPL numbers were impressive, am considering swapping out of my long standing CHK position for them this Spring.

  5. 5
    BirdsofpreyRcool Says:

    HeadTrader pointing out that open today could be worse, it could be better. But after the last 2 yrs, it just doesn’t seem that bad.

  6. 6
    BirdsofpreyRcool Says:

    Madison Wms out with a morning note… UPL “Buy” with a PT $71.

  7. 7
    dij Says:

    7300 shares of KOG at 2.58, is that an anomoly, or soemthing substantial?

  8. 8
    zman Says:

    BOP – I think sentiment could swing the market the other way, been stronger than expected of late and the forecast has been dipped over the last week. But yeah, China. They’re shut down all next week and people will probably be watching the Olympics more than the stocks, especially on a holiday shortened week.

    Wonder what the EU says on Monday/Tuesday … could bounce the Euro off resistance at the key 135 level. Also later we’ve get the oil and gas reports. The oil one might matter to oil and energy … not thinking a lot of folks outside of the gas trading pits will pay attention to the gas one unless it is widely divergent. So gas stocks to follow the market and not the commodity as per the recent M.O.

  9. 9
    BirdsofpreyRcool Says:

    dij — KOG… doanno. KOG should be just about done testing well #10. They are drilling well pair 10/11 in an area they already know is good, so maybe with their additional year of operational experience, well 10 showed some nice IP rates.

    There are no secrets amongst the Bakken players. If a stock is moving, it’s got a reason behind it.

  10. 10
    zman Says:

    5 – yeah, definitely not terror. Like I was saying, you get the right sentiment and oil numbers (and I don’t think the oil inventory number itself cooperates but more the diesel numbers) and they could turn this thing green. Do that and you set up a nice short covering rally. China needs to learn to play right re releasing numbers before a market opens and not after it closes. Or maybe they just wanted to thump our market before a holiday.

    BOP – maybe or maybe someone is just playing games, no reason to buy pre market above the ask in my book. Unless you’re trying to start a Friday rumor or mess with the chart.

  11. 11
    BirdsofpreyRcool Says:

    z — here’s the thing… the euro, Greece, PIIGS and STUPIDS, don’t amount to much in the overall scheme of things these days. But CHINA does. Raising bank requirement to cool off lending and prevent bubbling is probably a good thing. But, it is a global growth inhibitor.

    That’s always the trade off, tho, isn’t it. You want Bubbles? Or banks stepping in to lower the level in the punchbowl.

    Less punch is less dramatic… but you don’t have nearly as bad a hangover the next day.

  12. 12
    BirdsofpreyRcool Says:

    Drama Queens

    IG +2 1/2 bps now

    HY -15/16 pts

    Bears pushing.

  13. 13
    zman Says:

    I don’t want bubbles and they are growing too fast, building too much residential and office space, for their needs to keep that populace working. I just think you announce a move like this before your market opens or at least not when its about to be shut down for a week, that’s all. Hard for their market to digest a new environment when it is closed, that’s all.

  14. 14
    BirdsofpreyRcool Says:

    z — no argument from me! Mr. Mrkt agrees with you too.

  15. 15
    zman Says:

    UPL coming off with everything else despite a better than expected quarter, upped guidance, and a stock which though elevated in valuation b most E&P standards is none too high for it and it’s closest comps.

    BOP – 10 est numbers may be more key than usual.

  16. 16
    kiaora Says:

    Z Would you be pushing some feb positions into this weakness?…Or jump to march?

  17. 17
    kiaora Says:

    BOP–same question about the SPY

  18. 18
    zman Says:

    Kia – I’m just watching for now. My gut says we close higher, lots hinges on the sentiment and oil numbers though so I won’t do anything until I see those. With so much uncertainty brewing and a long weekend and things coming out of left field like this second China bank reserves hike (I thought it would later down the road given the benign consumer inflation numbers earlier this week) I’m not fond of further Feb stuff at this juncture.

  19. 19
    zman Says:

    Nicky’s last support level was 1,060. S&P now at 1063/1064.

  20. 20
    milepost_43 Says:

    Good IV post on Keystone XP pipeline
    http://www.investorvillage.com/groups.asp?mb=16243&mn=303&pt=msg&mid=8581232
    As Montana Gov. Brian Schweitzer said, Currently, there are only two American states that have consistently continued to increase their production, and that’s North Dakota and Montana. However, despite this increase, there’s something troubling to the oil and gas producers, the landowners and the governing bodies of the state – the market differential of Bakken crude is too great. “During its height in 2008, there was a difference of $23,” Continental Resources President Jeff Hume said. Currently, the price is much lower, Harold Hamm issuing a statement last week saying it is $8 to $12 per barrel, and that’s a price that adds up even with oil at a fairly steady price of about $70 per barrel.

    This difference means
    Bakken producers will receive $63 or so as compared to $73.

    Where the difference comes in is the lack of sufficient infrastructure for Bakken producers to ship their product to market. This means there’s not enough room in the pipeline systems, and not enough pipelines to easily ship the crude oil.

    The common thought is that once the oil is extracted it goes straight into a nice pipeline that will soon send it directly to a refinery. However, that’s not how it goes in the Montana or North Dakota Bakken. Companies have built rails, tracks, and must truck their product either to a refinery or to a tap, “on ramp,” of a pipeline that is going to the proper market.

  21. 21
    zman Says:

    BEXP fighting back slowly, all action moot before more data but interesting. Perhaps they have another ops update on the near term horizon.

  22. 22
    BirdsofpreyRcool Says:

    kiaora — thx for asking. I can’t add any color here. For 2010, I am looking to go long when the price tag of something I’ve studied goes on Sale. Will peel some off, if it moves too far too fast.

    I think 2010 is all about peaks and valleys. So, you can pick good stocks at good prices, then take the rest of the year off. Or, try to buy low, sell high, rinse, and repeat.

    As for timing… z is much better with options than I am. I tend to get blown up by getting the idea right, but the timing wrong. Kind of a downer skill set, if one wants to make $$ in options.

  23. 23
    BirdsofpreyRcool Says:

    Already seeing the High Yield CDS Index back away from the lows. Down only 3/4 pt now.

  24. 24
    zman Says:

    Milepost – I think you posted that last week and I didn’t follow what the guy was saying on this part:

    Bakken producers will receive $63 or so as compared to $73.

    Which is backwards. Differentials to NYMEX were busy contracting late last year after being wide in 2008 and early 2009. So they get more, not less for their oil as takeaway capacity from the area is expanded via a couple of new pipes and EOG’s rail expansion.

  25. 25
    Nicky Says:

    Morning all. I would still like to see 1060 hold on the SPX. If it does this is likely a b wave with c up still to come into the middle of next week and likely to target the 1086 area and higher on the SPX. If 1060 doesn’t hold well……let’s not go there just yet.

  26. 26
    zman Says:

    Minute chart on BEXP is interesting and maybe foretelling. Ok, ok, I’ll stop. But damn if it doesn’t look like a telephone pole off the bottom in this sea of energy hate.

  27. 27
    zman Says:

    Nicky – thanks much, I’d bet we have an answer on whether it holds in the next five minutes.

  28. 28
    john11 Says:

    ATPG quite strong, any news around or broker comments? Excellent buy point mentioned by JB back at 13.

  29. 29
    zman Says:

    Who’s been reading their Murphy at night? Me. Noting the RSI on the DUG ETF putting in lower highs. Ok, enough TA for me for the month.

  30. 30
    zman Says:

    Agreed John – don’t see anything on my services for them but it was a good bottom call.

  31. 31
    zman Says:

    Sentiment: 73.7, low

  32. 32
    zman Says:

    Philly Fed out too, sees 3% GDP 2010, 2.7% 2011.

    Business inventories down 0.2%

    Retail inventories flat.

  33. 33
    zman Says:

    Nicky – interesting post data reaction in the Euro (up) vs dollar (down) leading to . S&P at least so far having held, now at 1067.

  34. 34
    VTZ Says:

    I think think the dollar is ultimately going to roll over here.

  35. 35
    VTZ Says:

    *still think in 34… not think think

  36. 36
    Nicky Says:

    Yes its sure whippy. Next week tends to have a postive bias into expiry. Either that or I guess we go straight down to make new lows.

  37. 37
    Nicky Says:

    VTZ – there is that huge short position in the euro you referred to a few days ago. That is going to cause a massive move shortly imo.
    Note that gold and the euro are moving up again of their earlier lows. They are proving to be a great barometer for the indices short term moves this week.

  38. 38
    zman Says:

    Gas numbers in 10 minutes.

    ROSE not holding up well here.

  39. 39
    choices Says:

    ATW-very good points on the impact of unscheduled maint, Z. It seems to be holding up relatively well today in a weak mkt-maybe the news has not yet sunk in.

  40. 40
    zman Says:

    Gas just before inventory report: down 8 cents at 5.32.

    191 Bcf …

  41. 41
    zman Says:

    Gas close to even now.

    Street was 183, I was 190 to 200.

  42. 42
    zman Says:

    Well that’s one data point less to worry about this week and next.

  43. 43
    zman Says:

    Gas in storage now 2,215 Bcf,

    up 8.4% to year ago levels
    up 5.4% to the five year average

    Good chance we break the 2 Tcf mark with next week’s number. Given the forecast 1.5 Tcf looking a lot more doable.

  44. 44
    zman Says:

    Choices – or maybe it has sunk in and this is all we get for it, was hoping for a silly reaction but not getting it yet at least. It’s annoying to have happen yes but these things do happen and if they would knock it back a bit more I’d be adding.

    NG up 5 cents now.

    Oil numbers in 25 minutes. Also the UPL call which is worth a listen as it and potentially RRC will neary as much of my gassy stock time as SWN this year.

  45. 45
    elduque Says:

    re 37 – huge short positions don’t always work in favor of the bulls. A lot of money was made in huge short positions in 2008.

    GMXR is one stock that being short hasn’t always hurt you.

  46. 46
    zman Says:

    Eld – true. The massive short in natural gas is going on its third year if I recall. They can often stay short longer than you think.

  47. 47
    BossmanG Says:

    lol sign of top?

    http://www.bloomberg.com/apps/news?pid=20601109&sid=awQzRIHP_ZPw&pos=12

  48. 48
    zman Says:

    BEXP back to 15 and just north of it. Seems strange people would get it there quicker today than yesterday unless there is buying for the press release potential going on. I noted volume was up fairly early and is tracking for an ok day for this time of day which you can’t say for a lot of the other names.

  49. 49
    Jerome Blank Says:

    UNG…the topside trendline of the forming triangle and 100 day SMA both converge at about $10.25, if we can base there, the next target is $11…you can really start to see the “fry pan” bottom developing…

  50. 50
    zman Says:

    Jerome – agreed with the shape of the chart but also need to add a “beware the ides of March” statement as we’ll be approaching the should season which would take demand off the winter steroids and give us a peak at production vs the same season a year ago via how fast you see builds. Builds come on too quickly and gas will get knocked for a temporary loop.

  51. 51
    zman Says:

    TEXW – can you give me a timeline on TD to completed and flowing on your Haynesville wells? I mean once you are at TD, how long til you have it fracked and a 24 hour rate?

  52. 52
    zman Says:

    EIA Oil Inventory Report

    Crude down 2.30 at 73 just before release

    Inventories:
    Crude: up 2.4 mm barrels
    Gasoline: up 2.3 mm barrels
    Distillates: down 0.3 mm barrels

    Imports: off about a 100,000 bopd

    Demand:
    Gasoline: up at 8.766 mm bpd, from 8.613 last week

    Distillates: 3.696 mm bpd, up slightly from last week.

  53. 53
    zman Says:

    Report not in its normal format, still parsing…

  54. 54
    Jerome Blank Says:

    RE: #50, UNG, Zman, I’m totally with you…I mention it because at this particular moment UNG is in a very easy position to manage, stops right under the lower triangle trendline target short term resistance at $11… but longer term UNG is currenttly still on a P&F sell signal and we have yet to see a higher high swing… from here UNG …”bearish signal reverses” on a print of $12.50…that would be huge, also breaking above 200 day SMA resistance….UNG needs to stay above $9 to hold the X’s, if it does break down, to new lows, the place to reconsider longs would be on the development of bullish divergences to futures….

  55. 55
    zman Says:

    Odd looking report,

    Shows imports down but also shows refining throughput up from 13,461 mbopd in the prior week to 13,590 mbopd. Hard to see how inventories rallied on those two.

    Cushing stocks continued to fall.

  56. 56
    zman Says:

    That’s not a bad oil report, if a bit oddly formatted and counterintuitive on the oil number.

    I’m surprised at the higher gasoline demand, bet that peels back next week. Big chunk of the country is snowed in.

  57. 57
    zman Says:

    EIA showing utilization was up 1.4% last week, would would be surprising but would also help to explain the gasoline number being a bit bigger than expected and the distillate number not falling as much. This is quite the opposite of the report the API saw. Still don’t see the rise in crude stocks on higher demand and lower imports. Domestic production was up week to week but not nearly enough to offset the other two.

    BEXP at $15.14 and climbing

    Oil down $2

  58. 58
    zman Says:

    Can’t find link for UPL call.

  59. 59
    bloodystupidjohnson Says:

    Z:CXPO you said you where interested at a lower price. What is your investment case for owning this company?

  60. 60
    zman Says:

    Nutshell on the oil numbers. Not bad. Good to see Cushing inventories continue to fall. YoY oil inventory deficit continues to grow despite the build which still looks suspect to me. Refiners must be deciding some margins are better than (on no volumes) and that’s adding a little oil demand.

  61. 61
    zman Says:

    BSJ – hang on, I’ll go find it and circle back.

  62. 62
    zman Says:

    Re Crimson… this is what I wrote on Jan 11 this year with the stock at 4.30. See the last paragraph for why I might like it.

    CXPO – Crimson Exploration Quick Look

    The Basic Story: Texas minnow sized E&P, operating on a tight budget through 2009 due to high debt and low natural gas prices. Production is largely onshore natural gas sources from South Texas. Spice is added via a small acreage position in the East Texas segment of the Haynesville where the company participated in one of the biggest announced Haynesville wells to date (30 MMcfepd operated by DVN). The company also has acreage that is prospective for the Eagle Ford Shale. In mid December, they raised roughly $93 mm to pay down debt (more than tripling the share count in the process) and gear up for a capital program in 2010 that should arrest declines and potentially provide for a small uptick in production later in the year. At present Street coverage is nil but I’d expect them to at least get the underwriters on board with reports in the not too distant future. The stock has fallen 20% since the deal.

    Capital Spending:

    * 2009:Like many of the micro cap, indebted E&Ps, the year saw them rein in capital spending due to low prices, as a result, production began to slip accordingly.
    * 2010:
    o plan calls for $56 mm (within expected cash flow according to them)
    o 64% East Texas – Haynesville Shale
    o 24% South Texas – Liberty county gas targets
    o 5% South Texas – Eagle Ford Shale; Zavana county oil EFS might make this story a little more interesting later in 2010.
    o 7% land and seismic
    o This gets you 12 gross or 6 net wells

    Production: Not a great record of meeting guidance.

    * 1Q08: 52.6 MMcfepd
    * 2Q08; 53.127 MMcfepf
    * 3Q08 54.126 MMcfepd
    * 4Q08: 50.0 MMcfepd – started pulling back on spending here.
    * 1Q09: 47.9 MMcfepd
    * 2Q09: 42.825 MMcfepd (guidance was 44 to 48 MMcfepd, was then reduced to 42 to 46 MMcfepd)
    * 3Q09: 38.271 MMcfepd (guidance was 37 to 41 MMcfepd)
    * 4Q09E: Guidance of 37 to 40 MMcfepd

    Reserves:

    * 120 Bcfe as of 9/30/2009, 73% natural gas

    Hedges:

    * 2010:
    o 16 MMcfgpd @ $7.71, so about 73% if they hold produciton flat.
    o liquids largely offset, about 700 bopd or nearly all of their oil production at $83 per barrel.
    * 2011:
    o 16.6 MMcfgpd @ 7.32
    o 300 bopd at 66.50

    Balance Sheet:

    * Net debt to total cap: 49% after the recent offering and a subsequent asset sale in East Texas.
    * Interest coverage should be adequate following the debt paydown and they are currently in compliance with their covenants.

    Valuation:

    * TEV / EBITDAX: probably trading at 7 to 8x 2010 levels.
    * Market’s valuation of reserves: $2.49 / Mcfe

    Nutshell: In a word … pricey. Not big enough to be a good target candidate in any of its areas .Given the market’s pricing of its proved reserves at $2.49/Mcfe. The drop from the extreme dilution the original shareholders absorbed is not surprising. On the plus side, several members of management have good track records with good firms and the name will have a number of catalysts in 2010 including more big target drilling in the Hayneville and perhaps two Eagle Ford Shale tests which could drive the shares higher later (from a lower level). My sense for now is that the stock needs to fall further to get in line with some semblance of valuation reality. I’ll keep an eye on it for now.

  63. 63
    dij Says:

    BOP: thanks for #9, must have been an buyer aberration. Do you, or Z have any thoughts about far out EXXID options, on significant pullbacks? The March 15’s were bought at 3.10 the other day.

  64. 64
    dij Says:

    Re #63
    50 of the June 20’s traded this AM.

  65. 65
    zman Says:

    dij – I hold those, want to see the next Davy report before I add more. It depends on what you are looking for in terms of the name but if you want to be exposed to them knowing, one way or the other, about Davy Jones, then March should probably be long enough to go out. By that I mean logs and other science but not a production test, for that you have to go with stock (I hold that as well) or LEAPs which I find to generally be a bad deal.

  66. 66
    scoop006 Says:

    Z, See anything re “X” tremendous Feb. call buying & up $.50

  67. 67
    Nicky Says:

    Z – tell me I am not losing it but why are we having the oil and gas numbers today??

  68. 68
    BirdsofpreyRcool Says:

    dij — the next update we get on DJ should be end of next week (at earliest) or middle of following week…. assuming nothing more goes wrong during these final logging runs.

  69. 69
    zman Says:

    Re 67: Snow in DC shut the town down. I noticed the world continued to spin so maybe should shut that place down much more often. How do you trim the budget? You go on a diet.

    Scoop – well, I mentioned on the site last night but that’s probably not enough. Maybe it was the casing, tubulars comments getting tight from TEXW earlier in the day which I’m hearing here and there again after a period of looseness. Maybe it’s that if China slows, X’s cost of met coal will drop. Just musing.

  70. 70
    VTZ Says:

    Since I already have the reputation of being a gold bug I have no shame in linking to Jim Sinclair’s commentary today.

    http://jsmineset.com/2010/02/12/fix-the-euro/

    My highlights:
    “Trichet certainly wishes he kept his mouth shut when the euro was at $1.52 as the decline thereafter to his verbal intervention set the stage for the attack that followed.”

    “We have created so much paper in the world that it is now considered kindergarten to attack individual stocks when you can bankrupt countries.”

  71. 71
    bloodystupidjohnson Says:

    Good sites: http://www.valueinvestorwatch.com — contains latest 13f’s of many value investors — plus its parent site http://www.rocketfinancial.com — lists latest spinoff, bks, ipo, investor presentations, etc.. is also a worthy site for your attention.

  72. 72
    zman Says:

    VTZ – that stuff is always welcome. Still watching SU, grinding back to its recent lows.

  73. 73
    Jerome Blank Says:

    EXXID, gapped down into the 5 min channel and has been trading off the 100 period SMA all morning…if bullish. aggressive buys here for a break back above the topside trendline, next try at lower 5 min channel line support, next major support at 20 SMA at about $18.40…

  74. 74
    BirdsofpreyRcool Says:

    JB — thx for following EXXID for us. I have a lot of eggs in that Easter Basket.

  75. 75
    zman Says:

    BSJ – did 62 give you what you were after on CXPO? I planned on fleshing it out more if it fell and so am getting closer to being excited.

  76. 76
    VTZ Says:

    Still watching SU as well… I heard from people that the fire flared up again yesterday morning because it wasn’t fully out yet and obviously the lines were purged.

  77. 77
    VTZ Says:

    I still don’t know the cause or how bad it was but I’m guessing it was a pump seal if what I heard about it being the coker feed pumps is true. No info on repair time yet either and I suppose that info about the fire flaring up again could be rumour as well.

    I meant to say “lines *weren’t purged” in 76. I need to start re-reading before I post.

  78. 78
    zman Says:

    VTZ – have they given new guidance with lost production for this, haven’t read all that’s come out.

  79. 79
    bloodystupidjohnson Says:

    Yea Z, I was just curious on your investment case for CXPO. It is not a company I follow so I was just curious.

    You know Z, when I was running my investment partnership, and since I was a bottom up stock picker, one of the hardest thing to do was generating new ideas. I was forever checking out potential stuff that I might be interested in. So asking about CXPO was just an old habit that I still have — lol.

  80. 80
    zman Says:

    IOC popping up again, also a few mid cap E&PS green, FST (which is below its granite wash announcement level now), GDP, COG, PVA, and three Shelf players (CPE – nice move there of late, EPL, and ATPG). Everything else but natural gas pretty read although for the most part much less so than at the open along with the S&P which looks to have fallen asleep at the 1067 to 1069 level.

  81. 81
    jiveyjr Says:

    HK attempting to break above yesterday high of day…seems to be gaining a little life, at least for the moment

  82. 82
    VTZ Says:

    No updated guidance yet for Feb or 2011, I think they are still evaluating and don’t know yet.

    Yesterday they reported 154 kbpd for Jan as a result of the december fire which is somewhat light in my opinion considering they are definately hiding lots of bitumen that will hurt their margin/bbl in those numbers.

  83. 83
    VTZ Says:

    Keep in mind too that mine variable costs are low compared to the fixed costs so I’m not sure how well the analyst models account for the cost curves in big outages like these. These outages are definately big hits to the 2010 bottom line.

  84. 84
    zman Says:

    VTZ – thanks and don’t let me forget about it because I probably will if left to my own devices.

  85. 85
    zman Says:

    Those BEXP $15s are $0.60 bid, size bid at 0.55 now with the stock at 15.32

  86. 86
    bloodystupidjohnson Says:

    VTZ: West Energy today came out with their reserve and opperational update. Report wasn’t too bad.

  87. 87
    BirdsofpreyRcool Says:

    If the mrkt can shrug off the CHINA +50 bps today, then that probably bodes well for next week. We will have have shook the jitters out. And with China closed all next week (and Greece looking like the minor annoyance that it really is), then perhaps we can catch a bit o’ the green in the short weeek next week. Would help to see some M&A announced on monday or tues.

  88. 88
    zman Says:

    … and very volatile I should have added.

    BOP – you may be right on the flat call for the day. I’d prefer we take out 1080 but that’s asking a lot of a market in front of a three day weekend.

    Oil down $1.30 now, more market than the inventory numbers at this point.

  89. 89
    VTZ Says:

    Thanks BSJ, wasn’t on the ball on that one as I hold small bits of NAE, MEL and PWT but I should pay attention because I want to add.

  90. 90
    kaman Says:

    Z- re: 85…on this trajectory, are you holding those calls til next week?

  91. 91
    VTZ Says:

    BEXP definately moving.

  92. 92
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    Market Update – a relatively busy morning in terms of data/actions (bunch of delayed US eco releases hit today, a lot of EU Q4 GDP #s, and the China RRR action, etc); in addition there are continued sovereign worries (Greece is still in the background and today Dubai spreads are busting wider and hitting levels not seen since Nov). Stocks opened weaker, but there wasn’t a ton of high conviction behind the weakness this morning. Market held in well (never came close to 1060 support level) and there is a decent underlying bid on the weakness; the tape is rallying gradually off its lows from this morning. The desk is seeing some long nibbling on the weakness (esp. in the semis/tech – the SOX has rallied strongly and is breaking into the green as noon passes), inc. from vanillas. Shorts not laying out fresh exposure and used the weakness this morning as an oppy to cover. Tone of the tape exiting this week much better than it was heading in as eco releases show improvement (jobless claims, retail sales), there is some action taken on the Greek front, Chinese authorities have taken action and will be quiet for the next week+ during their New Year, technical levels held in, and earnings come to an end.

    Equity Sectors – the earnings calendar today was relatively light – only big names were IR (off ~7-8%) and A (up 2%). Financials, health care, industrials, energy, and utilities are all off >1% but moving off their lows. The financials underperform for a second session and have been notable laggards all week (esp. the banks, which are suffering more from a lack of buyers than aggressive selling). Tech is OK as the semis catch a bid (SOX actually breaks into the green today, moving nicely off its lows….the desk continues to note buying in tech ahead of a busy week of earnings). Energy is one of the market’s weakest groups (weighed down by DO, EP, OXY, DNR, SII, EOG, VLO, etc – all are off ~2%; pretty broad weakness in energy). Health care is sluggish today (CFN and BSX off 3-4% and hurting the equipment stocks while the HMOs are pretty heavy – HMO index is dwn 2%+).

  93. 93
    zman Says:

    re 90. Jury out on that. I sort of doubt they have a press release next week. They could have a well to talk about at Ross are with an extended lateral, high stage count well, which I think they would pop off before the quarter if it were big but having a second well ready for a pr by Tuesday would be a trick. Maybe they have it, maybe not, they’ve been a touch slower of late, likely due to really bad weather. But its acting really resilient and I’d feel a little dumb if I don’t take it off the table and China takes some other actions in front of the Dali Llama meet and greet with the POTUS next week. Mulling.

  94. 94
    zman Says:

    VTZ – liking the move in NFX with earnings next week – moving into the middle of channel which never broke down like the other names. Big granite wash wells anticipated so if they are smaller than expected, look for it to give back a little. I may roll that one prior to their numbers to give myself room.

  95. 95
    sunshine Says:

    Voted 🙂

  96. 96
    TEXWS6 Says:

    Assuming you have a frac date, you are looking at atleast 3 weeks to prep the well, location, frac, drill out plugs, flowback and cleanup and turn to sales.

  97. 97
    zman Says:

    Thanks much TEX

  98. 98
    dij Says:

    Z,
    Thank you for for # 65, that sounds right about EXXID and the time frame. It is not advice but is good sense.

  99. 99
    zman Says:

    Leaning towards selling the BEXP today. Don’t trust this market. If they have something for a Tuesday release then I have the stock and some currently worthless higher strikes that might benefit.

  100. 100
    Jerome Blank Says:

    EXXID, with the intraday consolidation developing in EXXID over the last 30 mins, an interesting alternative triangle seems to be forming on the 5 min, which may be helpful to better frame intraday support and resistance, as you can see a pullback to this mornings consolidation might be a good point to consider longs if the triangle holds together….

  101. 101
    Jerome Blank Says:

    RE: #100, EXXID chart….

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

    #95 sunshine, thanks much for your vote….

  102. 102
    zman Says:

    Rig Count Watch:

    oil down 2 to 443, vs 273 a year ago

    natural gas up 13 to 891 vs 1054 a year ago.

    horizontal count is up 4 to 663 vs 497 a year ago.

    7 of the rig increase was in Louisiana

  103. 103
    VTZ Says:

    Jerome – Is an SU chart out of the question?

  104. 104
    West Says:

    ATPG, For those with interest have production test in hand for atwater 64 well at new location. Spin is one zone tested for 3k bopd not including flared gas. Probably release press release next week at conference. Company still debt heavy, but should be able to monitize Titan to GE for 300 million when it goes into production. The stock still has at last report about 24% short interest and they just made a ton of money from most recent down move. Probably time for the shorts to move on to other areas. ATPG has moved 14% in 2 days so be careful.

  105. 105
    Jerome Blank Says:

    RE: #103 VTZ…SU. charts and a few thoughts…the probabilites are not great, but looking closely SU has easy to manage risk here for the brave…

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

  106. 106
    BirdsofpreyRcool Says:

    According to HeadTrader, an EXXID close over $20 would be H-U-G-E.

    Just a little something to cross your fingers and hope for, on a squishy Friday afternoon.

  107. 107
    Jerome Blank Says:

    RE: #106, EXXID… $21 prints a “spread triple top” P&F buy signal…$21 also takes us out of the string consdolidation…thinking it’s porssible $20 might still act as resistance zone, bringing us back into the consolidation for another good buy opportunity…

  108. 108
    VTZ Says:

    Thanks Jerome. I’d actually love to see SU the bearish P&F objective. Would make for some easy decision making!

  109. 109
    tomdavis12 Says:

    Z: At the close today BNI will be replaced by BRK’B in the S&P 500. Due to the size involved this will necessitate the sale of an estimated $10B in other S&P stocks to accommodate the inclusion of BRK’B.

  110. 110
    zman Says:

    Weekly chart interesting on BEXP, irregardless of my FEB calls, the stock has managed to get back into the level at which it was trading when oil was double it’s current level. I’m not yet sure I want to be long any calls for their 4Q call as I’m a little concerned about operating expense control and the fact that the Street may be disappointed by volumes one last time before they start moving up, although I do expect their oil reserves to pick up smartly which will be a nice change from last year (although a fully anticipated one at this point and they make take a hit on the gas side). I’d expect them to stick with their usual early to mid march numbers release.

  111. 111
    BirdsofpreyRcool Says:

    JB — you have earned your crown as TechChart King over and over again. Keep up the great work.

  112. 112
    zman Says:

    Tom – how much is that as a % of total current value on the index?

  113. 113
    BirdsofpreyRcool Says:

    To add to #111, Nicky rules on calling general market trends. So JB and Nicky share the crown… and my thanks.

  114. 114
    tomdavis12 Says:

    Z: 112 DK

  115. 115
    jiveyjr Says:

    EXXID…wow

  116. 116
    zman Says:

    re 114. We used to have an analyst who devised plays on the rebalances, I’ll bet someone out there has some commentary on the expected impact of it.

  117. 117
    zman Says:

    Jivey – MMR starting to creep up as well, not far off a closing high.

  118. 118
    zman Says:

    And once again PXP acts like its never heard of the ultra deep or Davy Jones.

  119. 119
    jiveyjr Says:

    yep MMR been very good…i hold a little of it still

  120. 120
    BirdsofpreyRcool Says:

    or Lucius…

  121. 121
    zman Says:

    Jerome – what does the green X, which would be the fourth X in this column on the NOG chart signify?

  122. 122
    tomdavis12 Says:

    Z: 116 Will check re your questions.

  123. 123
    zman Says:

    UPL – I could not listen to the call, if anyone sees a post mortem on it please send to zmanalpha@gmail.com. I liked the releases, numbers looked very strong as per post, wondering if it is just the day that is holding the name back here. Will get the transcript as soon as it is available but on a good day I would have expect that to be through $50.

  124. 124
    zman Says:

    Ram just asked via email when SSN becomes the thing. Good question. Will get back to you on that. Chart is saying now. That’s my favorite looking kind of chart on a daily or weekly candlestick, the scoop chart.

  125. 125
    baylor3217 Says:

    Question about traders…

    Someone was talking last week about buying a SPY position at 1050 and possibly unloading it around 1055.

    How much money are they typically putting into those types of transactions? I’ve always been curious what some day traders are dealing with and what they are willing to risk on moves of 1/2 of 1%.

  126. 126
    tomdavis12 Says:

    Z: 116 This time on the rebalance, My guy says you play this one by being long BRK’B.

  127. 127
    baylor3217 Says:

    I’m trying to sell my remaining BEXP calls for .65 if anyone wants to buy them 🙂

  128. 128
    baylor3217 Says:

    $15 feb’s

  129. 129
    baylor3217 Says:

    BRK-B volume at about 1/8th normal volume for the day. interesting.

  130. 130
    baylor3217 Says:

    Thoughts on HK calls here? I played follow along with a whale that made a huge call position a month ago in some march calls that are now wayyyyy out of the money and am considering some option repair strategies for closer in the money calls.

  131. 131
    Jerome Blank Says:

    Re: #121, NOG added a new X with the print of $12.50…NOG at topside triangle trendline resistance now…

  132. 132
    elijahwc Says:

    Bigfoot moving into TRGL. 40m shrs without respect for shareprice or mkt conditions.

    Love my Dogs: MHR, ATPG, TRGL

  133. 133
    zman Says:

    NFX approaching $52. Cheap name, lots of potential catalysts, should be a good call, finding costs should be pretty low.

    Baylor – I think they trade with the group or a little better next week as gas should be strongish compared to most things. I don’t see a near term catalyst there and Tom said the company was mulling not having a 4Q call which seemed weird but then they’ve already talked about everything new of late and won’t have data on the EFS oil play until late March nor will they have a monetization before that time frame, at least I don’t think they will and that lack of a monetization in the near term/ fear that the unhedged portion their gas production will be subject to lower prices forcing them to cut capex and therefore production is probably what’s put a lid on the stock despite all the recent upgrades and all the good news they have trotted out.

  134. 134
    Patipati Says:

    Jerome, voted! I love your charts.

    Stupid question: do tails count re gaps?

  135. 135
    Jerome Blank Says:

    RE: #134, Patipati, thanks much for the vote and comment…do you mean within the tail or below or above a tail?…

  136. 136
    tomdavis12 Says:

    Z: I think your HK comments are spot on.

  137. 137
    zman Says:

    Very tempted to bite on a starter position in UPL here in March calls. Am going to wait for Tuesday since I have not been able to read the transcript but don’t plan on letting this one run away again.

  138. 138
    zman Says:

    Tom – thanks for that email. Mucho gusto!

  139. 139
    tomdavis12 Says:

    Z: 138 It is even from one of the decent analysts since there are few.

  140. 140
    baylor3217 Says:

    Filled my bexp calls at .55. I decided to close out before the long weekend. I need some M&A news to help my remaining 4 or 5 scuds in the February calls, the largest of which is SWN.

    Why I didn’t take the opposite side of that trade at the time, I have no clue. I guess Scott Brown winning turned out not to be a good thing for about half of my Feb call positions.

  141. 141
    zman Says:

    Movie theme friday: hard hat hits light bulb = big fire in what movie? Its right at the beginning and always makes me think about Wyo and TEXW.

  142. 142
    zman Says:

    Baylor – yep, the speech to punish the banks was the next day.

  143. 143
    Patipati Says:

    If there is a tail below candlestick, then gap, then later a tail above candlestick sealing gap, does that count to close gap or do the candlesticks have to close gap?

    Not very clear; sorry about that.

  144. 144
    BirdsofpreyRcool Says:

    elijah — i heard the TRGL has a very compelling booth at NAPE this week… telling their “Bakken-look-alike” story to lots of ears eager to listen.

  145. 145
    BirdsofpreyRcool Says:

    #141 BackDraft?

  146. 146
    kaman Says:

    ICO having a climb-out day

  147. 147
    zman Says:

    BOP – oilier

    Kaman – surprised the group is up, considering they are seen as such a China play by most.

  148. 148
    kaman Says:

    hellfighters?

  149. 149
    BirdsofpreyRcool Says:

    Hellcats?

  150. 150
    zman Says:

    Not selling my BEXP, beerthirty.

  151. 151
    zman Says:

    148 = bingo

  152. 152
    reefguy Says:

    TRGL- still looking

  153. 153
    reefguy Says:

    DJ triad not doing the friday late raly

  154. 154
    kaman Says:

    cheers

  155. 155
    BirdsofpreyRcool Says:

    reef — i looked at their drilling schedule. Seems we have some time there. Might be interested, closer to spud. Buy the spud, sell before the IP results. Just thinkin’ out loud…

  156. 156
    elijahwc Says:

    BOP – Hey Thanks. Good info and I think the share price discounts the story coming. Especially now since the ugly financing is behind us. Here’s my pitch. TRGL is is the “New French Normal”. Potential for a jobs recovery assuming we can drag ’em away from the customary two hours at the cafe. Makes one want to frac some rock in the wine country.” You bring the Beaujolais and BSJ and I will be there with the Tums.

  157. 157
    BirdsofpreyRcool Says:

    maybe people figured out the Triad won’t have anything to say on Tues… will have to wait a bit longer than that.

  158. 158
    BirdsofpreyRcool Says:

    elijah — I was looking at the TRGL’s acreage position last night. It’s in amongst some tasty wine country… including the Champers Region. A personal fave.

  159. 159
    elijahwc Says:

    TRGL: Opps…should have said “share price does not discount” #152 – its Bigfoot. We find out who later.

  160. 160
    tomdavis12 Says:

    Z: BRK’B nice trade. Did so without me.

  161. 161
    BirdsofpreyRcool Says:

    Not a bad day… considering how it started. MMR ended up leaving EXXI and PXP in the dust. But, that’s ok. The DJ Triad are connected at the hip. In the long run, MMR goes up on DJ, the other two will too.

  162. 162
    BirdsofpreyRcool Says:

    elijah — maybe Soros is adding to his position….

  163. 163
    elijahwc Says:

    BOP #158 “earthy undertones with just a hint of fracing fluid”?

  164. 164
    BirdsofpreyRcool Says:

    hmmmm — smells like Giddings, TX to me… the smell of OIL MONEY. 🙂

  165. 165
    jiveyjr Says:

    have good w/e everyone…

  166. 166
    zman Says:

    Back at ya Jivey and good luck with the ponies. We’re off Monday for President’s day so I’ll probably post the wrap then.

  167. 167
    PackMan Says:

    BOP – speaking of China:

    China: The Mother of all Black Swans ? http://www.zerohedge.com/article/china-mother-all-black-swans

    Interesting presentation …

    Have a good weekend folks…

  168. 168
    West Says:

    http://www.benzinga.com/120416/investment-analysis-atp-oil-gas-atpg-%E2%80%93-an-undervalued-stock-with-major-price-altering-catalys………………. This is link to ATPG article that contains a lot of good information especially about stock price and debt.

  169. 169
    West Says:

    http://seekingalpha.com/article/187252-atp-oil-and-gas-undervalued-stock-with-major-price-altering-catalysts-imminent

  170. 170
    West Says:

    Link on # 169 appears to work ok first link didin’t work on test.

  171. 171
    Jerome Blank Says:

    Good afternoon..several chart updates and comments….added a 30 min ATPG chart

    Chart updates…

    $bpener
    $bpnya
    McClellan
    $spx close-up
    AEZ
    ATPG
    KOG
    MMR
    NFX

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

  172. 172
    Jerome Blank Says:

    Charts and comments added…

    UPL
    $hoil:$natgas-relative strength

    #143 Patipati…in my veiw, tails count in closing a gap…the body of the candle is not needed to close the gap…

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

  173. 173
    TEXWS6 Says:

    No Z today?

  174. 174
    zman Says:

    TEX – U.S. market is closed for President’s Day. Crude is up a dime, NG flat in very light trading. I’ll have the wrap post up in a bit in an in progress version all day.

  175. 175
    TEXWS6 Says:

    cool, look forward to it…

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