Thursday – Oil Review and Natural Gas Preview

Print Friendly, PDF & Email


Market Sentiment Watch: Yesterday I said S&P at 1,118. Wow. At 1118.79 I pretty much will just say read yesterday. We tried to go higher and it was much ado about very little. I did raise cash in the ZCAT as promised and made a longer term trade in the ZLT as well (WRES out, more TAT in).  Demand numbers for gasoline and distillate came in at respectable if not exciting levels for a second consecutive week and this may inspire a smallish bounce in the U.S. independent refining group who have been all but circling the drain.  I  would reiterate that it's time for the "so now what?", post earnings season lull that so often hits the energy names at this time of year, often exacerbated by a lack of big conferences, news, and the Spring shoulder season for natural gas. So, I'll be more focused on the catalyst list for awhile. 

Ecodata Watch:

  • Jobless claims: 469 K vs 470 K expected,
  • Factory orders: due out at 10 am EST, forecast 2.5% vs last reading of 1%.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - LGCY and WNR quick looks, EXXI analyst meeting
  6. Odds & Ends


Holdings Watch:

ZCAT (Zman Catalyst portfolio, formerly the $10KP II):

  • $22,600
  • 50% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • MMR  - Sold the 20 MMR MARCH $17.50 CALLS for $1.30, up 71%, with the stock at 18.20.

    • MMR - Added (30) MMR MARCH $20 CALLS for $0.35, upping my leverage and risk to future news.

    • HAL - Added 10 more HAL MArch $32 Calls for $0.85 with the stock at 31.95.

    • BEXP - Sold 20 (half) of the BEXP $17.50 March Calls for $0.85, up 16% (on the mid, a little slow) with the stock at $17.70. I continue to own the other half and the common in the ZLT.

ZIM (Zman Inefficient Markets portfolio)

  • $12,900
  • 100% Cash (No positions)
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • NONE

ZLT (Zman Long Term portfolio)

  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • WRES - Sold my position for $2.43, up 30% since last May. Results didn’t match my expectations on reserves.
    • TAT – Added a second tranche for $3.27, brings average cost to $3.11.


Commodity Watch:

Crude oil rallied another $1.19 to close at $80.87 yesterday, after the EIA released somewhat more bullish product demand figures for gasoline and distillates (see below). This morning crude is trading flat.

  • China Watch: China to import more natural gas, electricity and crude from Russia. China is said to be looking at bolstering its emergency crude reserves as well, no details on quantity yet.
  • Mexico Watch: Reserve replacement = 75% means Mexico proved reserves are shrinking. PEMEX also said it will grow Chincontepec, it's replacement field for the aging and swiftly declining Cantarell field, by 100% to 60,000 bopd. Three thoughts: 1) I'll believe it when I see it, 2) that's a drop in the bucket in the face of Mexico's declines, and 3) the field was supposed to be at 100,000 bopd in 2009 and only reached 32,000 bopd by January 2010.
  • Nigeria Watch: MEND blews up an AGIP manifold and attacked a Shell flow station over the last two days.

Natural gas inched up another $0.05 to close at $4.76 yesterday, it's second consecutive up day. Woo hoo. This morning gas is trading down 4 cents.

Natural Gas Preview

  • My number: 130 to 135 Bcf
    • Last Week: 172 Bcf Withdrawal
    • Last Year: 101 Bcf Withdrawal
    • 5 Year Average: 112 Bcf Withdrawal
    • 10 year Hi: 30 Bcf Withdrawal
    • 10 year Low: 176 Bcf Withdrawal
  • Street Consensus: 127 Bcf

EIA Oil Inventory Review

ZComment: Good to sea a seasonal rally in gasoline demand and a minor upswing in distillate demand. Some concern on crude imports showing what may be the beginning of the end of several months lower than average imports. Or it could just be an anomaly, brought about by oil stored at sea, cashing in on elevated prices before the next OPEC meeting. As you can see in the table above, inventories remain elevated, especially for distillates. We are approaching the point of the year where gasoline wags the oil price dog but this year, a recover in diesel demand will also be necessary to help maintain oil prices in the current trading range.












Stuff We Care About Today

LGCY MLP Beats 4Q Expectations; Quick Look - Interesting, Worth a Listen

The 4Q #'s:

  • Production of 8,250 BOEpd, up 0.7% from 3Q
  • EBITDA of $32.4 mm vs $31 mm expected
  • Distributable CF of $25.2 mm
  • Yield here now is 9.6%


  • Reserves up 20% YoY, on back of higher liquids prices AND lower operating costs
  • Distribution remains at $0.52 per unit. Distribution coverage of nearly 1.4x (distributable cash flow / distribution of (0.52 x 34.88 mm units)
  • They did two equity deals recently, doesn't sound like another one in the offing soon.
  • Borrowing base redetermination April 1, expecting it to go up.
  • Hedges:  good positions in place

Conference Call: Today, 3 pm EST

 WNR Reports 4Q09 -Quick Look

The 4Q Numbers:

  • EPS of ($0.58) (ex items) vs ($0.68) expected  ~ so a slight beat


  • Weakness due to the usual suspects ~ weak economy, reduced demand for transportation fuels, and narrowing of differentials between light and heavy crudes.
  • The slight beat on the quarter is due to cost cutting; direct operating expenses fell at YoY at 2 of their 3 refineries (and these were their two largest throughput sites).
  • Going forward they should see some benefit from higher throughput of higher sulfur(lower cost) crude.
  • Management pleased to see the slight uptick in refining margins I've been talking about of late, from end of 4Q into the New Year and they expect to see improvements in margins as the driving season gets underway. 

Conference Call: Today, 9 am EST.

KOG Watch:

  • Just noting Credo's 10% interest in a Petro-Hunt operated well IP'd mid February at 1,474 BOEpd
  • Petro-hunt has two rigs operating just west of KOG's Moccasin Creek area where KOG has a rig on their #13 well now.


Odds & Ends

Analyst Watch:

  • (ME) target upped a buck to $18 at Credit Suisse, stays Outperform
  • (APC) target upped from $75 to $90 at FBR


164 Responses to “Thursday – Oil Review and Natural Gas Preview”

  1. 1
    zman Says:

    And I thought things were tough on Wall Streeter’s over here. Greece locking up brokers for selling govt. bonds to pension funds at inflated prices alleging they are a threat to the public.


  2. 2
    bill Says:

    PETD 10 -k is out but earnings release isn’t

    Looking at the 10-k looks like a revenue and a net income miss

  3. 3
    zman Says:

    ARD on the watch list today, seems like it needs to find a technical trading range before the bounce.

  4. 4
    zman Says:

    Bill – they had their key ops metrics out on Feb 17, not sure when their call is.

  5. 5
    bill Says:

    west had a good post late last night that im coping and pasting here.

    Thanks for the insight. I agree the call was unpolished and sometimes left me confused. I listen to others (ard) and it seems to be a recurring theme.Tph asked a basic question on well completions and they went round and around. anyways here is west comments on ARD

    Bill just a couple of thoughts on ARD. The management has to be viewed as not taking care of business and overwhelmed by problems that they should already have programs in place to resolve . I was recently in this area and it is amazing the amount of drilling, completions, pipelines and flaring of gas that is taking place. The Electric company use to be a Co-op and converted to a stock company and has been reluctant to make large capital investments and has had some financial problems during the recent downturn. So there will be no help from them in the near future. Several operators are in the process of building their own gas powered electrical generation plants but as ARD alluded to this is a regulatory nightmare and at least a 12 to 18 month process. Just the shear amount of capital that is being invested in this area and resulting increased production by independents and to name a few, CWEI, EAC, HES, EGN, CVN, WLL and ARD has overwhelmed the infrastructure. It takes less than a month to drill and complete a well. To design, engineer, obtain regulatory approval and build a gas gathering system can be as short as 6 months to years that evolves with the on going field development. In Texas the Railroad Commission will not allow you to indefinitely flare or vent large quantaties of gas. So if you don’t get hooked up you have to shut in well production. So as ARD has said they are 12 to 18 months away from a near term solution…………………………As for the stock action in ARD sure it was an overreaction to the down side but remember they are many people that want the price of stocks to go down. There were probably a tremendous number of stops activated with the drop adding even more selling pressure. Also many money managers were forced to sell their positions with a 25% drop in price, thats just part of their job to conserve capital. Just my opinion but they will not be in any hurry to get back in the stock after that type price action. If you have a long term horizon this is probably a good buying opportunity. I bought some yesterday thinking that the selloff was over done and was rewarded with an additional 10 % reduction in price today. I would have to say that their conference call was very uninspiring and unpolished which didn’t help the matter. Sometimes these engineers have a hard time with these CCs ……Price action looks like a well executed short shark attack or computer programs that kicked in and that kept working. Sometimes fundamentals don’t have anything to do with stock price, this is something that we all have experienced and didn’t enjoy. This will probably be daytraders paradise for the next little while so be aware.

  6. 6
    Jerome Blank Says:

    BOP…I have the TED spread now at .12, a new low yesterday…seems like the credit mkt is of the view… “no concerns here”…

  7. 7
    zman Says:

    BOP – was the 17D Petro Hunt well the one you were referencing the other day as being close to KOG’s and possible not a good completion or was that another well. The 17D well is listed in the post above.

  8. 8
    zman Says:

    EXXI – seeing pre market volume at 21+.

  9. 9
    zman Says:

    That EXXI call is underway …

  10. 10
    BirdsofpreyRcool Says:

    EXXI presentation was webcast… i got in near the end.


    — hit 30k BOE/d production over the weekend (you just gotta LOVE a mngmt team that does what it says it will do… and on time!!)

    — Davy Jones on the slide at 6Ts of reserves. WOWOWOWOWOWOW.

  11. 11
    zman Says:

    EXXI ongoing…


  12. 12
    BirdsofpreyRcool Says:

    HeadTrader pointing out that analysts are now going to have to incorporate at least SOME of Davy Jones into their price targets. You just can’t continue to ignore that Big Hairy Pink Elephant in the room. It’s there. It needs to be recognized.

    This should be fun.

  13. 13
    BirdsofpreyRcool Says:

    Keep in mind… that at 30mb/d the price of DJ should be around $25. Davy Jones is just icing.

    And here’s the thing… DJ is not the “best” of the ultra-deeps… it’s just the one they drilled first, due to lease expiration constraints.

  14. 14
    bill Says:

    petd is being taken to the woodshed

    look like down 15 %

  15. 15
    zman Says:

    EXXI – later in the slides they show flowtest at DJ as a potential stock driver. No kidding.

    Good slide on 23, comparing Davy wells vs Hayensville and Marcellus. Not your typical five year and out shelf gas producer and nothing like the hyperbolic declines seen in the onshore shale wells.

  16. 16
    zman Says:

    Bill – looks like analysts got ahead of guidance. That and the stock has been making highs on an almost daily basis for quite some time now. Call is at 1 pm today, not sure how long this EXXI goes on but if its over I will listen to that one and the LGCY later.

  17. 17
    BirdsofpreyRcool Says:

    z — #15 BINGO. It ain’t the run-fast-on-the-treadmill kind of GoM shelf wells. Those are Miss-America-beee-u-tee-ful “decline” curves. Complete with the diamond tiara.

  18. 18
    BirdsofpreyRcool Says:

    ok… don’t want to sound like i’m cheerleading. so, i’ll quit now. but i just rarely (so rarely these days) get to see a mngmt team actually execute the plan that they themselves laid out. kudos to Schiller and his team.

  19. 19
    zman Says:

    BOP – are you listening to the financial guy talk? Pretty good stuff.

  20. 20
    zman Says:

    MMR pre market trading back towards yesterday’s highs.

    Davy Jones cash flows “very, very well” at $3 and higher.

  21. 21
    BirdsofpreyRcool Says:

    slide 52… brings tears to my eyes.

  22. 22
    zman Says:

    re 21 – pretty easy to get to higher reserve total than that given the size of the structure.

  23. 23
    BirdsofpreyRcool Says:

    yes! gonna call the 16% 2nd liens first. that’s what we thought. ha.

  24. 24
    bill Says:

    debt cost will come down

    what are those 16 trading at and what is yield to call/worst

  25. 25
    BirdsofpreyRcool Says:

    analysts don’t even really know what to ask… what do you say to a Big Hairy Pink Elephant? you just kinda stand there with your jaw on the floor.

  26. 26
    bill Says:

    pxp has the biggest piece of the pie and really hasnt moved. I know its a lesser impact to them than exxi or mmr

  27. 27
    BirdsofpreyRcool Says:

    bill — i don’t have a current quote on the 16s. They are 144a and normal people can’t buy them. They are not traded in the light.

  28. 28
    milepost_43 Says:

    GPOR…am not much of a “fundy” and much appreciate everyone’s analysis here…following was posted by Sweet 16 Dan last night….did a ZMAN search but didn’t find any current comments…chart doesn’t look too bad…anybody follow?? thanks..
    I’m very bullish on Gulfport right now. Based on my forecast model the stock is trading $5/share below Fair Value.
    1. GPOR has a very strong Balance Sheet
    2. It is heavily weight to oil (90% of forecast production)
    3. Free cash flow is way above the Company’s capital expenditure budget
    4. Their Canadian Oil Sands project give it HUGE upside if oil prices spike. Basically, you get this upside for free at the current share price.

    OKLAHOMA CITY, March 3, 2010 (GLOBE NEWSWIRE) — Gulfport Energy Corporation (Nasdaq:GPOR – News) will hold a conference call on Tuesday, March 9, 2010 at 9:30 a.m. CST to discuss its fourth quarter and full-year 2009 financial and operational results, to provide management’s comments on the results and to provide an update on the Company’s recent activities. The call will follow the release of Gulfport’s fourth quarter and full-year 2009 earnings the morning of March 9, 2010.

  29. 29
    zman Says:

    Odd opposite moves in MMR to EXXI this morning. MMR started moving lower when the non-web cast ultradeep stuff was talked about in the other room.

  30. 30
    zman Says:

    ROSE back on the rally this morning early. Don’t see a note but I would suspect another broker is out there pounding the table on long term potential here.

  31. 31
    BirdsofpreyRcool Says:

    bought some MMR here… think there is just a mrkt disconnect. but, we shall see.

  32. 32
    zman Says:

    re 31 – Wonder why they aren’t broadcasting the ultra deep presentation.

  33. 33
    BirdsofpreyRcool Says:

    also, “another day, still no PR.” Think there is some of that going on with MMR stock.

  34. 34
    BirdsofpreyRcool Says:

    ‘cuz it’s being presented by the geologists. you never want to put your technical team on mike! 😉

  35. 35
    zman Says:

    I think someone in the room didn’t like something and sent a blackberry message.

  36. 36
    zman Says:

    BOP – You know I don’t buy that.

  37. 37
    BirdsofpreyRcool Says:

    then don’t buy any MMR down here.

  38. 38
    zman Says:

    Already own and am not.

  39. 39
    BirdsofpreyRcool Says:

    me too… just added some trading shares.

  40. 40
    skimo Says:

    Is MMR presenting today? I saw no links on their web site.

  41. 41
    BirdsofpreyRcool Says:

    skimo — no. But EXXI is hosting their investor day.

  42. 42
    BirdsofpreyRcool Says:

    EXXI going public with a 6T number for the Davy Jones Prospect. That is a big number.

  43. 43
    zman Says:

    Nothing wrong with that. Maybe they will webcast later. It’s just that giving the broad brush and the financials without showing the ultra deep is like editing down hard core porno to pg13, it doesn’t quite convey the whole picture.

  44. 44
    zman Says:

    BOP – They’ve said 6T before.

  45. 45
    zman Says:

    Nope, my bad, that was me. They said 1.5 Tcfe gross last presentation.

  46. 46
    BirdsofpreyRcool Says:

    they have said 6T a lot. just haven’t seen it on a slide like that before… along with the impact to NAV.

  47. 47
    zman Says:

    MMR coming off that low now, wheh, I guess it was people like me assuming what I assumed. I traded out of my big lower strike position yesterday and when to a higher strike, higher risk, smaller position.

  48. 48
    zman Says:

    Sitting on hands with payrolls tomorrow. May add a little more NFX anyway, continues to play above the range, looks like it wants to run to me.

  49. 49
    BirdsofpreyRcool Says:

    MMR = tough to balance the impact to the stock of hearing EXXI say “6Ts” vs MMR’s continued lack of final PR on DJ#1. So, should be bouncy-bouncy today, tomorrow…

  50. 50
    Jerome Blank Says:

    CPE continues to defy gravity…MHR not doing so bad either…

  51. 51
    andy Says:

    BOP – per last night question ARD is shortable

  52. 52
    zman Says:


    NFX – Added a second set of (10) March $55 calls for $1.20, with the stock just under $54. Stock had a good quarter but traded lower afterwards and is continuing to recover. Potential catalysts in the Eagle Ford, Bakken, and Gulf of Mexico in the next couple of months but for now this looks to be breaking out on the chart and seems worthy of quick trade.

  53. 53
    BirdsofpreyRcool Says:

    Andy — thank you. Appreciate your checking on that.

  54. 54
    BirdsofpreyRcool Says:

    JB — the Fleas are Jumping!!

  55. 55
    BirdsofpreyRcool Says:

    MMR sell off was stoopid.

  56. 56
    zman Says:

    Pending home sales fall big, factory orders up 1.7%, less than the 2.5% forecast.

  57. 57
    BirdsofpreyRcool Says:

    debt trading desk saying home sales were “all weather-related.” fwiw.

  58. 58
    zman Says:

    Probably so re pending homes, that actually makes sense.

  59. 59
    Jerome Blank Says:

    BOP, contrary to the shorter term indicators, like $NYMO, which are in overheated range…the TED spread seems to be suggesting higher broad picture stock prices at this point….no concerns seem to be indicated based on the chart picture…P.S. KOG hanging in there, trying to get out above the lastest tringle consolodation…I’m still holding all my shares…

  60. 60
    zman Says:

    re 55. I’d like to think so, I’d also like to see the slides from the other part of the non-webcast part of the presentation. Reef is there I think.

  61. 61
    zman Says:

    BOP – did you see my question re KOG and the petro-hunt well, see post? Was that the well you were talking about get off a poor completion?

  62. 62
    zman Says:

    Natural gas storage in 20 minutes.

  63. 63
    zman Says:

    NOG just refusing to pull back before earnings.

  64. 64
    BirdsofpreyRcool Says:

    reef called from his hotel room at the EXXI conf… he is also backing up the truck on MMR here.

    The Ultra-Deep play is an exploration paradigm shift (his words, but i agree). As geo-science people, you don’t get many times in your life to see something like this unfold in front of your eyes.

  65. 65
    BirdsofpreyRcool Says:

    #61 — no. Peak Energy well. Private company, owned by Yorktown (if i recall correctly).

  66. 66
    Jerome Blank Says:

    NOG 30 min chart perspective added…


  67. 67
    zman Says:

    Got ya, ok, thanks re peak. That Petro Hunt well was not far from the earliest and current KOG wells, at nearly 1,500 boepd and they have 2 more going down that are closer and in the FBIR

    Got the back up the truck email. Any comment on flow test timing from the EXXI guys in the ultra deep Q&A?

  68. 68
    zman Says:

    Thanks JB

  69. 69
    zman Says:

    Dollar index bounced back over 80 again, oil down 85 cents, ng off 4 cents with 5 minutes until storage.

    SWN forming little tight wedge, might be good on a good storage number but not working as of late. UPL, KWK (dual purpose trade there), RRC all more reactive to gas of late despite hedges.

    SD still in penalty box.

    ARD still no bounce.

  70. 70
    zman Says:

    116 Bcf, not great, not terrible, gas off 10 cents.

  71. 71
    TEXWS6 Says:


    How do you explain that small of a withdrawal with all the cold weather? It’s gonna be an ugly summer for gas prices!

  72. 72
    zman Says:

    Tex – I don’t think summer will be that bad for gas prices as I do think conventional declines will continue to come off and industrial gas demand will mount a recovery. When you say that small realize that for this week of the year, 130 Bcf withdrawal would have been a record withdrawal and 116 is at the low end of the historic range. Bill asked how you get a smaller number when the degree days are close to the same, and I would say it is a function of time of the year in addition to the degree days. How operators want to manage storage coming out of the season, end of freeze ups at wells, end of as much heating in the middle of the day vs running round the clock heat on the residential side and a lot of other variables. I employ a different multipier for heating in the month of November vs December vs January etc. March’s multiplier is lower.

    Anyway, we’ll have the usual squishy shoulder season and still have 4 weeks to down to my 1.5 Tcf target (or an average of 50 Bcf per week).

  73. 73
    zman Says:

    Like oil growth and want exposure to $8 + natural gas. TAT.

  74. 74
    BirdsofpreyRcool Says:

    Intra-day note from Madison Wms —

    EXXI- Analyst day presentation lays out 6tcfe case for Davy Jones (though slide 20 shows unrisked gross est exposure of 2.7 BBOE, or 16.2 t’s, and .4 BBOE net to EXXI). If we take the theoretical 6 tcfe gross risked case though, and apply a “risked” value of $1/mcfe, it’d be worth ~$12/share to EXXI at 12.3% NRI. Check out slide 21. Expect 2nd well result to delineate the find and reflect more value when we can see continuity….PXP- stock is off despite EXXI (which is up 4%. Granite Wash info results from others will come (and could provide some offset value to PXP), but current Lucius and D Jones news seem to be digested….GEOI – entered into a JV with Resolute Energy REN to develop 42k Bakken acres located in Williams county ND. GEOI will have a 45% interest.

  75. 75
    zman Says:


    MMR – Added 20 more MMR March $20 calls for $0.35 with the stock flat on the day after a good presentation at EXXI.

  76. 76
    tomdavis12 Says:

    Z: re MMR is there still a disappointment to be released regarding Hurricane D? If there is can it be buried with some of the positives? Could that also create a buying oppor?

  77. 77
    RMD Says:

    Marlis E. Smith, Jr.: does anyone happen to know of him? He is the new CEO of Credo (CRED) and claims has been pushing them to expand in the Bakken. Stock is barely public, considering how out of date their web site is. 10mm shares.
    GPOR comment I picked up, strictly FWIW as I don’t know the co: proven reserves worth $6-7/share. PUDs booked through 2019 = way too long so big writedowns should be forthcoming.

  78. 78
    zman Says:

    Tom – The news is out there, it might upon announcement create small dip but I would suspect its a short lived thing. That was an appraisal well, not dry but a failed attempted. So it’s a timing set back but doesn’t impact the prospect.

  79. 79
    zman Says:

    RMD – he was brought onto the board and then went CEO, says he’s been there a long time, don’t know him. First well was 10% WI, pretty good well, next well a couple of months away from spud. Their acreage is pretty small last I checked, like under 10,000 but they plan to grow it.

  80. 80
    zman Says:

    Likely to be sitting on hands rest of the day re additions in front of payrolls tomorrow. Sort of think the market gives that # a pass on a miss.

    Natural gas off 18 cents now to $4.57. Note also regarding comments on to Tex above that on similar weather in the prior year we saw a 101 Bcf withdrawal, so a year later, we are off 116 Bcf. That puts a combination of lower supply and higher demand at 2.1 Bcfgpd. As of December, EIA was showing YoY supply still UP 1.2 Bcfgpd.

  81. 81
    zman Says:

    Pickens on talking up natural gas for transportation.

  82. 82
    zman Says:

    Refiners very modestly green again today.

  83. 83
    zman Says:

    2nd day of profit taking on BEXP, I am likely to add back a little Friday for news next week or the week after.

  84. 84
    zman Says:

    Bill – 72 was my attempt at not answering your questions last night.

    Market holding breath for payrolls.

  85. 85
    bill Says:

    bentek nailed it witha 118 estimate

    EIA-912 -74 -15 -27 -116
    bentek 73 16 2 118

    Looking closely at the regions, the producing area did not fall as much as expected

    the last 4 weeks for producing are as follows


    the hdd day were about even but for these 2 areas were 16 % lower

    20-Feb 27-Feb
    south atlantic 203 171
    e s central 216 182
    419 353 86 -0.1575179

    the producing region includes

    Alabama, Arkansas, Kansas, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas

  86. 86
    zman Says:

    Bill – good point re producing region. Note that producing region is at 580 Bcf vs 708 this time last year and a 5 yr avg of 602. Producing region was very swollen by the end of the last injection season. If you take the previous 5 year average (2004 to 2008) you get 536 Bcf. So we’re back into the range on this number. East Region is in line with average levels. West remains bloated but that’s the smallest piece of the puzzle.

    Velocity of the ramp in the Spring will have a lot to say about where gas prices go but good to see us continue to come off.

  87. 87
    zman Says:


    BEXP – Added back the 20 calls sold yesterday at $0.70 for $0.40 with the stock off a second day at $16.60 on no news and with the expectation of Catalyst List type news in the next 2 weeks.

  88. 88
    bloodystupidjohnson Says:

    Another CNBC rant: yesterday a teaser before a commerical: “stay tune and find out about the stock that is up 300%”

    Why? Unless you told me about it BEFORE it went up 300% why should I care? Now if you have the next 300% stock BEFORE it goes up, then I am interested. — lol

  89. 89
    bill Says:

    here are all of exxi slides from company website


    the webcast only and half of these

  90. 90
    zman Says:

    Bill. Thank you very much! Had been looking for that.

  91. 91
    tomdavis12 Says:

    Bill: Thanks

  92. 92
    zman Says:

    Good walk through of other prospects, need to put Mykanos on the watch list, do a little work there.

    Slides 102 and 103 pretty telling.

  93. 93
    zman Says:

    BOP – Picture for you on slide 112.

  94. 94
    zman Says:

    Slide 116 – Davy Jones – Bigger than I thought.

    Potential pay ranges with aerial extent (acres) and potential reserves (TCF)

    100 feet 7,000 ac 1 Tcf
    200 feet 17,000 ac 6 Tcf
    300 feet 37,000 ac 16 Tcf

    Then look at slide 110 for an idea of how big that is.

  95. 95
    zman Says:

    Guess that we get new pay numbers next week.

  96. 96
    zman Says:

    Slide 121 … that is one big pipe.

  97. 97
    skimo Says:

    I may be showing my ignorance, but now that KOG has seen EXXI’s success with the reverse split, why wouldn’t they want to jump in and expand their population of potential buyers?

    BTW BOP is KOG in the wash or rinse cycle today?:)

  98. 98
    zman Says:

    Last slide, FRACTURES in all caps, temps not as hot as thought, very interesting.

  99. 99
    BirdsofpreyRcool Says:

    MMR being pushed into the stoopid corner again. As said earlier, it’s going to be bouncy (that means up and down) until the final PR (for now) comes out on Davy Jones. However, EXXI let some of the good news out of the bag this morning.

  100. 100
    zman Says:

    Skimo – I think the difference is platinum cuff links verses short sleeves in management styles. Also, you really have to have the Street lined up with you to pull off a successful reverse.

  101. 101
    zman Says:

    EXXI – here’s to assuming that they showed 3D on the wallboards at the presentation that they aren’t showing in the presentation, lol. Reef, any thoughts?

  102. 102
    BirdsofpreyRcool Says:

    skimo — KOG… they are a micro-mini company managing a good project with decent upside. There are institutional investors there, but it’s not going to be all that interesting to the Leon Cooperman’s of the world. It’s cheap to what they potentially have… but, it’s unclear where the long-term growth is going to come from.

    EXXI was a small company who scraped by after receiving a body-blow from hurricane outages to their high-yield debt-laden balance sheet. They were capital- and bank-covenant-constraigned. EXXI cleaned that up a bit and had a good story to tell about redeploying capital where others were going to sell out cheap. Also, Schiller had made a fairly small-priced but large-scope bet on JimBob’s Ultra-Deep prospects, right when MMR needed the $$. Then the Mitsui transaction came along and in one fell swoop, increased the company’s asset base by about 40%. EXXI bought the same assets from Mitsui for $12.50/BOE that they paid $22 for just two or so years ago. They had a great story to tell and a lot of people were interested. But, hedge funds want marginable securities and mutual funds want stocks that trade above $10. Hence, EXXI had a real reason to do the reverse.

    Little KOG just isn’t in the same league as EXXI… either asset base, growth story, interested investors, upside potential over the long-run, or shear size of operations. It’s apples and oranges to compare the two.

    That said, KOG is 100% oil (for the most part) with several ways to increase the value of their holdings and production. I still think it’s cheap. But, it will always be a micro-mini. EXXI is on the bandwagon to be part of a Whole New Era in Gulf of Mexico exploration and production. Unless acquired, EXXI’s market capitalization could increase 5x over the next 5 yrs. KOG just isn’t looking that Growth Horse in the mouth.

    That said, KOG is lower risk in many ways. No debt, resource project. Years of drilling inventory.

  103. 103
    RMD Says:

    101 just talked to an oilman at the presentation; he said they had all sorts of data around the walls, “it looked like a war room”, that they do not/can not put on the web site.

  104. 104
    BirdsofpreyRcool Says:

    reef said there were seismic sections, 25 ft long, tacked up to the walls. Geophysical Heaven!

  105. 105
    zman Says:

    RMD – thanks much, hearing the same. OII (the old Ocean) from whence Schiller came used to do the same thing, with lots of this slide left blanks in the take home version as well. Very common with the offshore guys.

  106. 106
    zman Says:

    Jimbobology – bigger bright spots than he ever imagined, lol.

  107. 107
    BirdsofpreyRcool Says:

    #98 — those are H-U-G-E statements. Natural Fracturing in reservoirs is Mother Nature’s way of saying “Merry Christmas, Happy New Year, and Happy Birthday to YOU” all rolled up into one.

  108. 108
    zman Says:

    Combine that with the pressure change (it’s sealed in there) and that big fat 2 hour plus long flare that was an accident and well, you kind of have to smile.

  109. 109
    zman Says:

    WNR – didn’t get listen to the call, see comments in post. I will read the transcript but just to keep up with the group, not planning to play those guys although they are running a bit today.

  110. 110
    zman Says:

    More reasoning for a big hurricane season this year: El Nino Modoki


  111. 111
    zman Says:

    Shell CEO comments:


  112. 112
    zman Says:

    SWN getting hit on the gas number, down nearly 4% at 40.90 and at a level where the chart either holds or fills a gap from last Fall at around $37.

  113. 113
    VTZ Says:

    Voser doesn’t really know anything though. He’s just a bean counter, cost rationalizer.

  114. 114
    zman Says:

    GS on fire here, much better than market, XLF. Wonder if they know something about payrolls….

  115. 115
    zman Says:

    Voser – and he’s talking his book.

  116. 116
    Jerome Blank Says:

    SWN breaks P&F trendline support and goes on a sell signal on a print of $40…as of now, longer term support still holding…

  117. 117
    zman Says:

    Thanks much JB

  118. 118
    zman Says:

    Bidding more MMR calls, not having much luck.

  119. 119
    skimo Says:

    Z, BOP thanks for the educationa and background music on 101 & 102

  120. 120
    zman Says:

    Anyone have a handle on what’s driving GS today, did congress declare their undying love for them?

  121. 121
    Jerome Blank Says:

    I’m bidding BEXP and not having much luck either….

  122. 122
    zman Says:

    Anytime Skimo, ask ’em if you got ’em.

  123. 123
    zman Says:

    Read through Barclays new Catalyst Watch. Hats off to them for a great idea!

  124. 124
    VTZ Says:

    Jim Sinclair:

    “Morning news reported that the medium term bond offering by Greece was met with enormous demand. Greece is holding 25% back for Greek investors.

    The euro immediately proceeded lower.

    What the market is saying is that Greece was within days of running out of money and a small rescue by some central bank, not necessarily the ECB, offered a SMALL bailout to keep Greece funded for a very short period of time to prevent bankruptcy next week. If you issue IOUs or can’t pay your bills you are broke, period.

    Now the inviting question is what central bank just made Greece a small loan against medium term bonds?

  125. 125
    zman Says:

    TISDZ volume off the hook today, these are the Treasure Island warrants that are a play on the Ultra Deep shelf.

  126. 126
    Jerome Blank Says:

    I’m .30 bid on some BEXP $17.50 Mar call options and even with that last draft lower, did not get hit….

  127. 127
    elduque Says:

    I have been lugging some UNG for the last week. I am going to replace it with HK and either EXXI or MMR. What percentages bet. HK and the shelf oil play would you think makes the best bet. And EXXI or MMR.


  128. 128
    bill Says:

    hk,sd getting pounded

    I exited mcf until i know more about outage which is knocking half their production offline.

    The market doesnt treat earnings disappointments well.

    next week eia will be a challenge with warmer weather and last year -112. My early estimate is -75.

    We warm up this week end, but the weather gurus are forcasting a colder than normal march

  129. 129
    zman Says:

    Jerome – It appears that spreads are pretty wide today as no natural buyers are stepping into the market in front of payrolls tomorrow, still not getting filled on the MMR and being patient.

    ROSE back to even. Better market and I think that takes another leg up.

    Eld – I think if Davy works then the shale guys better get used to $4 gas being a high number for them until we see a concerted moved to natural gas as a transportation fuel in this country. Some of the shales work very well at that price, others will require cost compression.

    On the MMR and EXXI – different stories but flipping with same coin. I own both for options at the moment, and EXXI shares as well.

    Bill – I hear ya, after the comps are -41, -1, and 0. I think Robry was around 70 for next week’s report.

  130. 130
    zman Says:

    HK – yeah, I just can’t beat my head against that wall. I like the story and its well hedged but it has a credibility issue, right or wrong, and that is just sticking with the name.

  131. 131
    zman Says:

    EXXI back above $21, rare that you see the legs of the DJ Triad so off kilter. MMR down 1.6%, PXP down 2.2%.

  132. 132
    zman Says:

    “Business as usual” … I only bring it up because I listened to NPR make a big deal out of this last week:


  133. 133
    zman Says:


    MMR – Added another (20) March $20 MMR Calls for just under $0.30 with the stock at $17.95. See today’s comments for further color here.

  134. 134
    bill Says:

    my man boone


  135. 135
    bill Says:

    Politicians want to get involved in every aspect of our life yet they ignore natural gas.

    2nd rant/thought..given that states and federal govt tax industry for extraction thru severence taxes, why dont we tax imports the same amount to level the playing field.

    4.50 ng should slow down exploration in this country. ChK and others are drilling only to maintain valuable leases

  136. 136
    West Says:

    good arbitrage covering trading on DNR today

  137. 137
    jiveyjr Says:

    SD is really breaking down but there are big divergences between price and rsi that would portend it may pop back toward $8 imho; the question is will it go below $7 before showing any inclination to snap back

  138. 138
    jiveyjr Says:

    I top ticked EXXI for the day; unfortunately on the buying side…

  139. 139
    zman Says:

    Jivey – could be wrong but I’m thinking it’s not done.

  140. 140
    reefguy Says:

    Exxi- geoscientist quote”it has to be filled to spill point” That 37,000 acres, 3000′ of column and 250′ of pay. That math means about 14 TCFE….I count at least 10 other structures…most look more appealing, particulary La fite

  141. 141
    jiveyjr Says:

    I look at that slide 16 and it shows me what a cost advantage this thing has……it should go a hell of a lot higher if that oil is really there as they think

  142. 142
    dij Says:

    ARD: I bought a little earlier, April. Starting to move.

  143. 143
    BirdsofpreyRcool Says:

    jivey — one day’s top tick is the next day’s “woulda, coulda, shoulda.” EXXI is going to be a long-tailed, up, and to the right stock… for many years. It’s more important to be on the train, with all your luggage, than staring at it disappearing down the track. Wishing…

  144. 144
    bill Says:

    Found this old post on a mb on Ard

    Funny and on point


    These guys need a total makeover on how to conduct a conf call.

  145. 145
    zman Says:

    Reef – from your lips to the Street’s ear.

  146. 146
    reefguy Says:

    Drinking at Admirals Club….plotting how to play the new play. Thinking about buying more luggage for the train…

  147. 147
    zman Says:

    EXXI/MMR – if that’s 250 feet of hydrocarbon pay at the end of the day on those numbers listed above, just splitting the difference between 250 and 300 gets you over 10 Tcf. That’s a big pile of gas. At 10 Tcf their share would be over a T and just under 3x current company wide reserves. You don’t get it all at once, you have to drill the development wells but that’s a step function change in the way it gets valued.

  148. 148
    reefguy Says:

    147—-I counted SIX BETTER PROSPECTS…they have a position in each one

  149. 149
    zman Says:

    Reef – don’t forget to pass out all those business cards I sent with you 😉

  150. 150
    BirdsofpreyRcool Says:

    Goldman is putting their money where their whispers are… ahead of tomorrow’s jobs number. Exchange from HeadTrader and PitTrader

    14:30] GSCO is quietly buying spoos. over 1000 spoos bought into the bond close.
    [14:31] Retail is shorting. GSCO is buying. The odds on that short working for retail is 1 in 100
    [14:32] Yes, you assume that GSCO ALWAYS know the news. ALWAYS.
    [14:45] GSCO 3 Retail 0 This is news?

  151. 151
    reefguy Says:

    z I told Shiller to buy you out

  152. 152
    zman Says:

    He won’t remember it but he and Hackett and I had lunch long ago, when he was at Ocean. He’s a gas finding kind of guy.

  153. 153
    zman Says:

    re 151 – I’ll take shares.

  154. 154
    reefguy Says:

    153-as your advisor in the trasaction, you need the shares….BTW maybe Hackett needs to own EXXI and/or MMR??

  155. 155
    zman Says:


  156. 156
    reefguy Says:

    Goose and tonic
    for me

  157. 157
    zman Says:

    Funny thing is Hackett was a bit late to the U.S. shale game having been focused on the deepwater everywhere. Cheap bucks for him to snap one or both of these up. He’s conservative but he knows value (KMG + Western Gas in the same day).

  158. 158
    zman Says:

    VNR took it on the chin again today despite a broker upgrade. I think I will stay away from the name until the yield gets above 10%. Still interested, just not that interested.

  159. 159
    bill Says:

    Ard is 90 % oil. They have 4 rigs working and will drill 300 wells during 2010.

    this is quarterly numbers for last 4 qtrs and my estimate for q 1

    They will easily double production and revenues for q1 and earnings and cash flow will follow.

    Despite their issues, i see this going back to 40. Someone ask, are there 20’s on the ground. i say no, they are c notes. Caveat, I rode sd down from 14 to 7

    qtr 2009 price/Boe production
    q1 35.55 568,021 20,193
    q2 50.46 547,695 27,637
    q3 58.86 612,609 36,061
    q4 66.35 638,262 42,349
    Full Yr 53.34 2,366,587 126,240

    q1 2010 66.35 720,000 47,772 20,193 137%

  160. 160
    BirdsofpreyRcool Says:

    bill — last time i checked, a c-note bets a 20-spot. thank you for the update!

  161. 161
    bill Says:

    what is spoos

  162. 162
    BirdsofpreyRcool Says:

    trader talk for S&P500 futures

  163. 163
    bill Says:

    ahhhh, ty!

  164. 164
    BirdsofpreyRcool Says:

    BedTime Market Strategist —

    Tick-Tock, Tick-Tock.

    Saying that today’s trading was slow is an overstatement. In anticipation of the February BLS Jobs report, investors sat on their hands. Despite a number of headlines and a rash of economic data, activity could not be stirred and the result was the third slowest trading session for Equities in 2010. Initial Jobless Claims were in-line, Factory Orders were in-line, but December saw a nice upwards revision. January Pending Home Sales were light. The only data that appeared to get (at least some) stocks moving were the Same Store Sales results. Although February is historically the second slowest month of the year, the results were so good they were still considered noteworthy beyond simply being better than expected. ICSC reported Same Store Sales were up 3.7% and Total Sales were up 6% year over year. The Dee-Bee Sales Weighted CSS index posted a 5.8% gain, which they highlighted as the best gain in 4 years and especially impressive considering the weather. The Retailing industry group was the best performing within the S&P 500 adding 1.3%, registering a new 52 week high leading into a 78% return over the past year. Greece managed to sell €5 Billion of 10 year bonds today, again with a vig just like the 5 year sale in late January. The Bid to Cover was 2.9x. As of the latest report from the Greek Ministry of Finance, Greece came into 2010 with €30.4 Billion maturing in 2010. Between these 5 and 10 year deals, €13 Billion of bonds have been sold, plus €1 Billion in 52 week T-Bills.

    The obvious reason for the slow activity is tomorrow’s employment situation report. It is widely recognized that weather is a large curveball. The low end of the estimate is a loss of 150,000 jobs. In discussions regarding the upcoming report, 1996 has been mentioned because of the January storm of that year which caused the report to come in approximately 200,000 jobs short of estimates at a loss of 19,000 jobs, then February experienced a gain of 434,000 jobs. Needless to say, no matter how the report comes in tomorrow, it will create jockeying of expectations for the March report.

Leave a Reply

Zman's Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette