Tuesday Morning Pause

Posted on by zman


Market Sentiment Watch: A market without economic data releases tends to drift either aimlessly or lower. Today is day two without data. I see a number of stories touting this as the 1 year anniversary of the turn higher in the markets and included a link to one at the bottom of the post. I also see, as expected,  a number of technicians worrying that the recent run is done AND that turning here puts in a double top (lower high for the market). We shall see but I have my doubts as these same guys were looking for a big fall in the last two months and missed the turn higher that brought the S&P back to 1,138. Earnings for the little names in the group continue to trikle out as the season winds to a close. Lastly, don't forget about the ZIM as it waits in the weeds (to borrow an expression); it will be active again soon.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - CPE
  5. Odds & Ends

Holdings Watch:

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

    • $19,200
    • 40% Cash
    • The Holdings Tab Is Updated for the Quick View portion.
    • Yesterday's Trades:

      • WLL – Added (20) March $80 calls (higher risk given the timing) for just under $0.95 with the stock at $77.75. My sense is that oilier names will outpace the gassier E&Ps during this post earnings season lull until natural gas finds a trading range during the Spring shoulder season. WLL is one of the cheapest names amongst the Bakken players despite the recent run there.

 

  • ZIM (Zman Inefficient Markets portfolio)
    • $12,900
    • 100% Cash
    • The Holdings Tab Is Updated.
    • Yesterday's Trades:
      • None


Commodity Watch

Crude oil rose $0.37 to close at $81.87 yesterday, in thin, listless trading. This morning crude is trading off $1+ on a strong dollar, weak equity futures and profit taking in front of this week's inventory reports which isn't too surprising after the run we've had.

  • Early Read On Oil Inventories:
    • Crude:  UP 2.0 mm barrels
    • Gasoline: UP 0.15 mm barrels - further firming in demand here will probably set the independent refining group to moving. See Cracks section below.
    • Distillates: DOWN 0.940 mm barrels

Natural gas eased another $0.07 to close at $4.53 yesterday. Gas is acting like it wants to find a short term home in the $4.50 range. This morning gas is trading up a penny.

  • Imports Watch: 8.9 Bcfgdp, down 0.3 Bcfgpd from last week.

    • Canada: 7.3 Bcfgpd, down 0.4 Bcfgpd from last week and 0.7 Bcfgpd from last year.
    • LNG: 1.6 Bcfgpd, up slightly from last week, up 0.5 Bcfgpd from last year, but still no evidence of a big build in volumes.

Crack Spread Update


Key Takeaways:

Last week I wrote: For the last couple of weeks I have been looking for the beginning of a seasonal increase in spreads. It looks like it may be starting but the action is still hesitant and I’d like to see gasoline demand remain elevated this Wednesday (though it’s not likely to mount a significant rally from here just yet). 

So far so good on all of the above.  It may be hard to tell in the first graph above but cracks spreads across the country are recovering at a fairly swift pace.

The stocks have started to take the slightest of notice as well, coming off their recent lows since the beginning of the month. VLO even looks like a break out on a chart.

 

 

Stuff We Care About Today

CPE Reports 4Q Results and Issues Guidance

The 4Q Numbers:

  • Production of 35.4 MMcfepd (53% oil) vs 20.7 MMcfepd in 4Q08
    • 27.4 MMCfepd in 3Q09
    • 33.1 MMCfepd in 2Q09
    • 33.6 MMCfepd in 1Q09
  • Revenue of $30.1 mm vs $24 mm expected
  • EPS of $2.45 including a $2.32 gain on recoupment of royalties and interest from the Minerals Management Service vs $0.03 expected.
  • CFPS of $0.39 vs $0.50 expected

The Basics: I don't write about CPE often. They plan to spend $61.7 mm this year as they transition from a deepwater and shelf player to a long lived onshore E&P company. They currently operate two divisions:

  • Offshore in the Gulf of Mexico Deepwater and Shelf. Over half of CEP's 2009 production came from their two deepwater assets, Habernero and Medusa.  CPE is looking to sell its Shelf assets, currently producing close to 14 MMcfepd and my hunch is that they will be looking at opportunities in ultradeep to farmout if they can't pull off a near term sale. 
  • Onshore:
    • Haynesville Shale - CPE has a whopping 577 acres in Bossier Parish.  Plan for 2010 is to drill 2 horizontal Hayneville wells (they are in the core and see reserves in the area as 6.4 Bcfe / well for $9 mm. Look for acquisitions here this year to bolster this toenail hold.
    • Permian Basin of west Texas (Wolfberry). Plan is to drill up to 16 Wolfberry oil wells this year.   Company plans to accelerate drilling after 2010 and will examine downspacing from current 40 acre to 20 acre spacing.
  • Essentially the idea is to take cash flow from the deepwater and reinvest it in the longer lived onshore plays it has recently entered. 

 

2010 Production:  (down from 4Q levels but again, it's a transition year)

  • 1Q10:  27-29 MMcfepd
  • 2010:  27-31 MMcfepd

Nutshell: CPE has run sharply in the last 6 weeks, story worth a listen today and potentially worth a trade.

Conference Call: Today, 11 am EST

BEXP speaks at Raymond James tomorrow. Could be time for another operational update to coincide with the speech as they have a number of wells listed as completing.

 

Look for the Big Cap E&P Orange Charts in Tomorrow's Post

 

Odds & Ends

Analyst Watch:

  • HK - upped to Outperform at Wells Fargo on valuation.
  • SM - upped to Outperform at Wells Fargo.
  • LINE - initiated at Neutral at Wells Fargo.
  • FSLR - cut to Underweight from Neutral at JPM

Housekeeping Watch:  I will be traveling March 22 through 26th, light posting only.

Interesting Reading Watch:

 

139 thoughts on “Tuesday Morning Pause”

  1. Analyst Watch: Dalhman ups DNR to Buy

    On the HK upgrade at Wells

    “We are upgrading our rating on the shares of Petrohawk based on valuation, relative underperformance, pending asset sales, and an increased Eagle Ford Shale assessment… We believe an aggressive spending plan and difficult gas tape have combined to offer investors an attractive entry point. We believe Petrohawk’s pending asset sales will likely serve as the catalyst for outperformance.”

  2. Re: Market sentiment watch…the 1150 $spx double top is so obvious a “bear” action zone and is being so widely watched that it’s highly probable that the technicals won’t unfold according to the traditional playbook..no question, the $NYMO is overheated and overbought…what’s interesting about the $NYMO however, is that under certain conditions, like this, when the mkt goes quiet, rather than have a massive sell off, a small range consolidation (shallow sell off) can work off the overbought condition bringing $NYMO back to neutral territory (0), setting up for a bullish breakout above 1150, contrary to the traditonal technical se-up expectation…I wonder if this is what’s going to happen…

    A few interesting bullish single digit technical set-ups….AXAS, CFW…

  3. Good morning JB, thanks for the comment and pretty much what I’m thinking. Saw all the fast money guys are scared as well which is probably also a good contrarian indicator. Wondering if anyone has seen newsletter sentiment, which troughed the day before this rally started.

  5. I was in and out of AXAS recently…just not comfortable that it was a boots-on-the-ground play…looked too much like a real estate holding company. Not enough due diligence on my part.

  6. K – AXAS has lots of moving pieces.

    CPE on the other hand has simplified their story greatly. Not saying I’m jumping in but will listen to the call. The stock is marked up into another breakout early.

  7. BSJ – I put the HK comments from Wells in for ya. I think that’s pretty much in line with what I was writing yesterday though they didn’t mention the potential for an oil play to also be a catalyst (maybe they did in the longer version that I have not seen). Anyway, I think their point is it’s overly beaten down which was mine.

  8. Found the Cannacord Note on BXE / BLLXF from yesterday:

    Bellatrix Exploration* (BXE : TSX : $4.20), Net Change: 0.42, % Change: 11.11%, Volume: 2,578,876

    Are all Cardium players created equal?

    As the Cardium names continue to be bought out, takeover speculation on Bellatrix continues to rise. On Friday, Daylight Resources (DAY.UN.CA) announced plans to acquire Cardium player West Energy (WTL)for $570 million. Earlier in the week, PetroBakken (PBN) acquired a privateco for total consideration of $253.4 million . The privateco had 1,200 boe/d of production (about 700 boe/d from the Cardium) and 24 gross (23 net) sections of land prospective for Cardium light oil on the west side of the Pembina Cardium field. This expands PetroBakken’s total prospective Cardium
    land base to over 180 net sections. Taking into account the acquisition price and our best estimate of the value paid for the production/reserves and facilities etc., we believe the implied value paid of the undeveloped Cardium acreage is approximately ~$138 million (+/–), or ~$6.0 million (+/–) per section. Bellatrix controls 133 gross sections (61% working interest) in the
    Cardium fairway in West Central Alberta; however, not all of Bellatrix’s acreage is prospective for oil in the Cardium. The company has identified 57 horizontal drilling locations in the Cardium oil trend based primarily on existing well control and up to 200 drilling locations based on continued drilling success. Bellatrix only has approximately 1.3 mmbbl of P+P reserves booked to the Cardium oil at Pembina, suggesting a large growth opportunity. The most recent Cardium transaction metrics imply Bellatrix may be worth $7-9 per share on takeout. The company expects to exit 2010 at 10,000 boe/d.

  9. Red open but not overly so. Crude off the lows, natural gas up for a change. Upgrade not really helping HK, same as the last five or so valuation upgrades there.

    CPE up 5% on the open, waiting for conference call before I decide to do anything.

    ROSE target at Pritchard at $32 now, last $23, that stock continues to drift higher.

  10. If you see any late to the game notes on ARD let me know, still watching that one for a bounce. Stock starting to form a wedge with declining volume.

  11. Z: Taken from comments by B. Handler @ CSFB. In Chicontepec region Pemex last week announced 4Q results. Going forward Pemex focus is shifting from drilling to completions. It plans to drill 505 and complete 688 wells in 2010. In 2009 they drilled 794 and completed 426. Good for WFT, SLB, HAL, BHI

  12. Morning all.

    My own thoughts are that we will move through 1150 quite effortlessly.

    I am still looking for a minor correction in this timeframe. The low should be in by 15th March. Best day this week for a move down is Thursday.

  13. Thanks Tom – nobody paying attention at the moment it seems but meaningful for W. Hemisphere demand. Combine that with PBR comments about expanding capex and the picture is pretty strong for rigs and service.

    CPE flat now, call at 11 am EST.

    Thanks Nicky, got support levels?

  17. Hi Z – support is at 1132, 1127,1118….

    What should make us cautious is that we have not seen even a 10% pullback in the last year. I think we will see a decent correction but I expect to see it during the summer months from May/June into October/November. However by May/June I believe we will be at 1200 or higher on the SPX.

    I hate to sound so bullish as far as the TA goes as fundamentally I am super bearish. I am in the camp that believes that in fact we are in a far worse state than a year ago. All we did was save the banks. Either way the end game will play out badly and its now just a question of how long we prolong it.

    Short term (next few days) its tricky! We either make a move up to 1145 area here and then correct or we could make a secondary low today before moving higher.

  18. Re 17: Fundamentally we are worse off. Look at all the states and municipalities that are way worse off than Greece and then extrapolate the effects of that with respect to what’s happening in Europe.

  19. The head of the LA City Council said two days ago that unemployment in LA was running at 13% for data posting purposes, but 26% in actuality.

  22. Something else to watch is that the Commitment of Traders numbers released today show a dramatic increase in commercial selling for the first time in many months.

    The effect of this is unlikely to be seen immediately but something to keep an eye on.

  24. SWN – nothing on my screens, could be a broker note, as it was outperforming on the open. I could see the same kind of note that was out on HK out on SWN, especially if the forecast cools some, which it is a bit although only minory so. I’d guess there is a takeout rumor on it given the stock and the calls and I would not be opposed to taking a little in here as I thought the quarterly release was pretty ok on costs, and good on metrics like IRR of the wells and production. The reserve bookings held it back so maybe that’s forgiven at this point, like I said then, that generally does not have a lasting effect.

  25. And COP for SWN makes sense as COP’s last big deal was Burlington which gave it the San Juan basin and Rockies exposure and this would give it midcontent and Haynesville exposure, still gassy, you’d think they’d want some oil.

  26. Those kind of rumors started this early in the week could be good for a run through Friday. Again, looking at taking a little here.

  28. ZTRADE – ZCAT – SWN

    SWN – Added (10) SWN APRIL $48 CALLs for $0.70 with the stock at $43.45, up 3% on takeover speculation. 99% of these rumors amount to nothing but both the stock (which I continue to own) and the premiums on options have a way of buying into rumors like this one that make sense for days on end. The quarter didn’t wow me but the stock is one of the best I know of long term so I don’t mind taking a shot at them getting taken out.

  30. RE 23: I expect rates to continue to get forced up.

    BOP – Do you have a forecast/expectation for interest on 10 and 30 year US paper?

  31. TechTrader is calling for the SHORT trade to work best today… but he only gives it 55/45 odds of working out. So, can’t read too much into the call.

    HeadTrader is seriously bored. But thinks you “buy the dips” in celebration of the 1 yr anniversary of the stock market low. He points out that Tech has been the outperformer recently. I don’t follow tech, but doesn’t it usually outperform when energy underperforms?

  32. PACK: Whitman explains his role in the letter. But he still sets on the investment com. and I am sure transactions are run by him for his views.

    Z: re 7 — thanks, like I said I was just curious and used RRC and HK as comparisons.

    RMD: collector cars are in a terrible market, at least from the sellers point of view. Caddys have made a come back especially, like yours, those 50’s with the big finns. Those 59’s Caddys are impressive!

    ELI: thanks for posting re 8: I did read that last night. I hate to tout, but for what its worth I do like BXE.

  34. SWN – interest continuing to mount, stock over $44. What we don’t want to see is a repudiation after the close. If we see no comment by either tonight, I’m likely to add more in the morning.

  41. #39 – i was just going to post that – big volume – i would be curious if there short position has gone up recently – following cc and earnings release. Seems like a knee jerk covering type rally thus far.

    A couple of notable developments for SWN worth noting – Harold Korell just moved from CEO to board – not sure what that means but he was always “stay independent” minded in my opinion

  42. VTZ — the US yield curve is the set of expectations the market has for a combo of expected inflation, risk, and supply-demand. I think inflation (at least, the kind where paychecks go up… for non-govt employees, that is) is non-existant for the foreseeable future. The “risk” is basically the US economy vs the ROW (rest of world)… here a one-eyed man can be king. The supply/demand is a combo of deficits and Asian appetite to continue to hold US treasuries. Oh, and there there is also the relative trade off between govt and corporate debt.

    Add your outlooks on all these things together, and you have what the yield curve should do.

    Too many major variables for me on predicting 10 and 30 yr rates. You tell me if healthcare passes, it gives me more of an insight on where a lot of the other stuff is going. But, BIG PICTURE says that wage-induced inflation is not going to be the driver of interest rates… which is what pushed yields up in the Carter Years.

    That said, the yield curve is steep steep steep. 282 basis points, 2s to 10s. Telling you the blinding statement of the obvious, that the Fed’s next move will be to raise rates. Only question is “when.”

  43. Z: CSCO news a new router that allows an increase in traffic flow by a factor of 12.

  44. RE: 39 — maybe the SWN takeover rumor was started by someone with under water March calls — LOL

  45. Credit market taking a bit of a breather today, giving back a smidgin of the massive gains over the last 2 weeks. Doesn’t really tell us much, tho.

  46. z — data quest question for you… do you know where to find the schedule for Federal Lease Sales in the GoM??

  47. BSJ – well it wasn’t me since I had none but such a deal would certainly send the group higher. I have strong doubts anything comes of it but the stock is due a bounce in my book anyway and could run for awhile.

  49. RE 47: remember the XTO takeover came out one week before expiry and the E&P sector was in a deep funk — the takeover was like a shot of Geritol (for those who are old enought to remember that product).

  51. Prius run away. Why couldn’t this driver just put his car in neutral?

  52. robry at -119 now

    03/05/10r.-19.5…-15.8…-16.5…-15.1…-17.2….-18.8….-15.9i..-119i……-119i……………….-110
    03/12/10r.-13.3i….-9.8i….-4.1i…..-4.1i….-3.0i……1.3i…….1.4i….-32i……..-32i
    Estimated EIA-Weekly based storage (As of 03/09/10)…….1584 BCF
    …………………………………………………..(As of 03/09/09)…….1691 BCF…(-107 BCF YOY Deficit)

  54. GS continuing to move, ever since before Payrolls. I find it interesting that it’s moving up to so quickly when everyone seems to be looking for a rollover.

    CPE going through the yada, yada at the moment.

  57. SD showing life…thx to whomever pointed out the purchase of the FST oil assets….high debt, well hedged, good institutional buyers of late, move toward oil drilling…I like it..

  58. Bill – yeah, you can refresh the link occasionally until it shows the 3/8 update, so far it’s not up yet and I don’t recall what day of the week they post it. Last week the 3/1 update was ready by Wednesday.

  59. RE 42: I understand the yield curve and the inputs and it’s inevitable that short term rates will go up hard at some point in the next 10 years although I don’t think it will be anytime soon.

    That being said, I think the 10 year and 30 year are discounting too low of rates for way too long.

  60. Going to take a little more SWN, pure speculation, but I don’t mind having an interest the stock… not much of a squeeze though as their is very little short.

  61. ZTRADE – ZCAT – SWN – PURE WILDZ – High Risk

    Added (10) March $45 calls for $1.15 with the stock at $44.40 on takeover speculation.

  62. oil hitting new highs
    ng hitting new lows

    and what rallies

    thats right the ng stocks

    bop mentioned yesterday someone loading up on sd

    hk, sd swn all getting buy action today

  64. Bill – I have a bunch of Bakkens in the green as well. WLL, CLR, BEXP, CXO, KOG, ROSE, and tiny SSN but yeah gas is up on the SWN rumor.

    Re SWN – yeah, didn’t go all that large with it, sort of figure I can come out 50% lower if it doesn’t work higher in the next 3 days and if no one shoots the idea of the deal in the head. COP is pretty slow to act on deals but so was XOM.

  65. Z,FWIW, ssn still putting press releases out every time the CEO has a bathroom break, but they have doubled since 1/20/10-albeit from .28 to .56.

  66. WLL trying to push on through for a full fledged breakout. Current level of 78.59 would be a new closing high and 79.16 would take out the recent intra-day high. I’m up by about 1/3 here since entry into the common late last year and I see no reason to punt given their valuation and oil prices.

  67. Skimo – I know and I look at it at the bottom of my Bakken list and consider removing it weekly and then I leave it. I found little to sink my teeth into there and the estimates I’ve found look oddballish. Plus, I don’t need another single digit midget at the moment so I’m passing for now but will continue to read the pr’s.

  68. BEXP trying to hold over $17, they speak early at RJ tomorrow and have occasionally in the past dropped an ops update press release on the market. I went through their Rough Rider wells yesterday and see 4 wells where the rig has moved and given the timing could be done with completion operations. I didn’t check Ross area but I don’t expect anything from there and it’s way to early to hear anything out of E. Montana other than that the well has spud.

  69. VTZ — #59… poorly-worded answer on my part. I know you know the yield curve. Guess i was just laying out my thoughts and criteria to try to answer your question as to “where is it headed.” As i was going thru the major drivers, i thought to myself, there are still too many unknown variables vs knowns to answer that question. The “smart trade” everyone was talking about was to short treasuries. On the whole, it’s worked a bit, but not to the extent that the “smart trade” advocates thought it would.

    Anyway, I value your thoughts and input here. I just don’t know yet. “Socialism” is expensive. If we go further as a country in that direction, we will have to pay more for our deficit spending.

  71. Why doesn’t CNBC haul out Prechtor again with his 666 call on the S&P? They have him on every time the chart looks toppy or he has a new book out. Has he been on yet?
    Did I miss it?

  72. Hey Jerome, on your charts for SWN, realizing that this price action is out of twilight zone of the M&A rumor mill, is a print of $45 where you would call the action less worrisome? Thanks.

  75. Re: #72…SWN…purely from a techincal perspective, I’d really like to see SWN get above $46…the $45 handle is right in the 50 and 100 day SMA resistance zone and is also P&F resistance…

    Re: #33, great, thank you…

  76. ROSE > $25. I continue to hold the common and will go back into the calls on the next set of red days as this continues to slowly play higher as people realize what the company is onto in the Alberta Bakken.

  77. Thanks on SWN, could be a day or two or just an afternoon’s trading away from that level since the M&A rumor monkeys have it.

  78. VTZ, Bill, choices, and others who think the economy is getting worse, here’s the next great trial balloon of a solution for you.

    Home short selling:
    http://www.nytimes.com/2010/03/08/business/08short.html

    They plan to pay you to sell your house at a loss and will not hurt your credit like a foreclosure. I’ll just tell my interns to study harder so they can help pay for this one.

  80. re 68, are those BEXP Rough Rider wells part of the USEG deal? USEG mkt action today seems to imply that.

  83. Interesting from Joe Bastardi on the Midoki El Nino and Hurricanes: (I lifted it because I pay the commercial rate to do so)

    THE MIDOKI EL NINO.. LABELING WHAT IS ALREADY KNOWN.

    Apparently a lot of noise is being made about something that is a known, that central Pacific-centered El Ninos bring a different result than eastern Pacific El Ninos. This type of El Nino has been labeled a “Midoki” which means the same, but different, and I have to snicker a bit because the global phenomena that is El Nino is because of the conditions surrounding it. By that I mean, if the PDO is cold, guess what, you are going to have El Ninos centered in the central Pacific. Why? Because the horseshoe of cold that forms in the north and south Pacific basins in the cold PDO is more likely to have the eastern Pacific lagging behind in an El Nino and so it is colder there relative to the central Pacific. Hence, the reason the winter was the way it was. It’s no coincidence that this winter was more like 2002-03 than the winters of the 1980s and 1990s (lack of any significant cold) and it was pointed out beforehand. However, that is not because of some new development. The only thing new is labeling something that can already be seen. Which is fine, you are allowed to do that, but it’s not like we have discovered the missing link.

    As far as the hurricanes, last year it was the dry air that was the big deal. You know how you can tell. GLOBAL activity was down. This is probably some kind of response to the shift of the PDO to colder in the longer term considerations, but the El Nino we have had, with the suppressed southern jet, has forced a reaction now in the tropics that has moistened them, and warmed them and the water is bathtub warm, but this is something that can be seen beforehand, and so I am telling you beforehand. Perhaps we can name this, in fact, you may go and put your own label on it, but the same thing happened after the 1994-95 winter, 1997-98 winter, 2002-03 winter and 2004-05 winter. All ninos that reversed to neutral this one looks to be headed to similar and the result is predicatable, that this year is a season to be concerned with. The development of the strong La Nina is not likely until after the season, if at all (I suspect it will get to moderate again.. you can’t hold a cold PDO down) But all this can be seen, not perfectly, but to some degree of predictability, based on studying past patterns, the current physical realities, one of them being the shift in the global temp, which is WHY IT’S IMPORTANT YOU UNDERSTAND THAT THIS IS PART OF WEATHER!, and then lastly bringing in the models to question or confirm such assertions. NOAA DECLARED THE EL NINO July 1 last year, it was declared here last March. So labeling things is fine, but it’s simply a case of sticking a name on a known, and one can go back and look.

    I will give you an example. Suppose I want to name the negative PDO and positive AMO together, the Bastardi global index. When this occurs, hurricanes are more likely to affect areas inhabited by people related to me, which is along the East Coast and New England, than in other years. This is why I am such a hype machine (they haven’t happened so I will concede that) about the East Coast hurricane, because I saw the colder PDO overall developing and understood the AMO is still warm. The last time that happened, the East Coast was slammed with 11 majors from the Carolinas north in a 10-year period (1950s), so have I discovered something new.. NO.

    It reminds of the Billy Joel song, “We Didn’t Start the Fire.” For those more spiritual, Ecclesiastes says it: “What has been will be again, what has been done will be done again; there is nothing new under the sun.”

    But this is not a new type of nino, which would imply something other than nature is causing it.. it’s something that is getting a new label, and knowing about this beforehand is why we nailed 2002-03 and if anything was underdone on this winter, which we had a nasty one forecast anyway.

    Ciao for now.

  85. BSJ 32: the big fins and boob taillights always get smiles, comments and thumbs-up; also 20 feet of car is just Big. If you need an ego boost, just go for a drive. (Just starting the engine probably = 1 gallon of gas.)

  86. CPE and ME and the off-shore cos are heading onshore to the shales and Bakken. Wonder why they don’t step up and tender for KOG or someone. Just musing

  87. RMD – re CPE – they just don’t have the firepower. They went into Haynesville in a very small way. I’d bet they have looked at farming into acreage in the Bakken and backed away over price/acre.

  88. Plan re SWN. These rumors almost never pan out. How I see it playing. I hold my March calls through Friday, sell late that day. Hold the Aprils through Monday. If no deal on merger Monday then I’m ok on time on the Aprils and can come out at my leisure. The Marches would be likely to be ground chuck in the event of no deal.

  89. BOP – RE 69: The problem is that you don’t choose what you pay to your creditors and there is too much supply over too long of a period of time for long term rates to stay this low.

    The most debt ever is in short term maturities. Once that starts rolling over, expect yields to only go up assuming the deficits aren’t reduced (and I can assure you they won’t be).

    The long bond will collapse eventually and man is that going to be a mess considering the amount of paper people are going to want to purge and the amount that will need to continue to be issued.

  90. Not to mention the paper on the Fed’s balance sheet.

    Not to mention all the unfunded liabilities.

    Not to mention…

  92. They can argue all they want about a higher dollar, but the facts state otherwise when you look at the states as a similar union to the EU. Greece is miniscule compared to California.

    The facts and statistics are being ridiculously ignored in an attempt to defend the dollar at the expense of smaller countries.

  93. Why isn’t the Cando rising more against the USD?

    We have no bank problems, hard commodities, the smallest debt to GDP in the G7 and a forecast to reduce the deficits the fastest… we are lower than last year vs the USD.

    Makes sense.

  94. VTZ – I hear ya and agree, they’re also arguing that the link between market and dollar is now positively correlated… we shall see on that one.

  96. Good chance we see a small pull back in crude imports tomorrow. For the report, the bar is set pretty low with a 2 mm barrel build expected. Also, refiners have been ticking up production in the face of not too terrible product demand. So if imports fall and utilization stays up you can see the potential for a smaller than expected build in stocks. I would not put my confidence in it at high but better than coin toss. Doesn’t really affect what I’m doing but if we get a draw down (which would be abnormal but not unheard of) look for the oily names in the Bakken to reassert leadership of the group.

  100. #74 Zman would you be able to point me to a source of information that would allow me to read and understand the well information that you have a link to?

  101. re # 79. Wednesday looks to be an up day too. But these charts are starting to defy gravity….

  103. Also Re 100

    In that last week, it tells you what depth they drilled to, they circulated mud in the hold then backreamed the hole to clean it up, tested the blow out preventer and then drilled ahead. Looks like they are getting ready to set pipe.

  104. This late and the day and SWN still up 4%, so far so good, no analyst out debunking the idea. I still think its not going to happen but the idea has momentum behind it and big volume in the common and the calls.

  105. I like the idea given Korell stepping back but still don’t see why COP, amidst $10bln worth of divestitures, takes a big bite.

    Of course I like SWN for other reasons, mainly valuation given everyone’s bearishness on gassy E&P pre-shoulder.

  106. #104 – was there a buyer for SWN mentioned in the rumor mill other than COP?

  107. #105 is exactly where i was headed – last i read about COP was them offloading stuff – not buying more new stuff…

  108. #100 ZMAN thanks for that site and info.Soon I will really be like one of you all…

  109. Isn’t it kind of hard to be bullish on NG with the amount of large shale plays that are being developed or waiting in the wings for development?

  110. 1520 – not that I have seen, agree with Jat as one of the reasons I don’t see it actually happening. These things get started very often by those that want out of their positions. If it’s real I think someone like TOT or STO makes more sense or domestically, like DVN. Doesn’t really matter who it is for my purposes and they’d make a nice gas division for a number of names, especially given the ultra low finding costs and large # of potential locations on a mostly held by production asset base.

  112. VTZ – did you see my chart of shale gas vs convention gas production in the lower 48? The much bigger wedge is not shale and it’s being neglected. It time the only way to keep production up will be to get on the shale gas treadmill with higher and higher rig counts. Once shaley you can’t really back off the drillbit, those 80 to 85% first year declines will really bite ya. I’m not uber bullish anyway, just thinking we get through Spring above $4, maybe a short lived dip lower but I doubt it, then head into the heat of summer with gas storage at a lower than recent starting point, and that gas ends the year closer to $6 to $7 as conventional really falls off. For that price to work you can’t have a big landfall of LNG and you do have to get back some more industrial gas demand. A hurricane or five coming into the Gulf could put a buck more on that range.

  113. KOG — big stock move… not surprisingly, M&A rumors swirling again.

    As we have mentioned before, KOG could act as a consolidator in the FBIR area of the Bakken play. Peak (private company, owned by Yorktown Energy Partners) is getting pretty long in the tooth, for a PE holding… Peak and KOG have a data-sharing agreement and know each other very very well. If Yorktown wants to sell (and what PE doesn’t, at some point), then KOG is the natural buyer. Just comes down to price and how that price gets funded. Would think Yorktown would take back some paper, maybe a combo of debt and some equity. KOG could use the acreage and — frankly — the staff that goes along with Peak.

    So, Koggers, we shall see.

  114. RMD – have not seen anything but the jag note blurb which only said they expect them to grow through acquisitions, rating it a Neutral.

  116. In the longterm I agree with you about the need to drill nonstop but in the short to intermediate term I see it capped in the same range as you somewhere just above 6 bucks.

  118. NY’s Deputy Environmental Commissioner, Paul Rush, on the tape, doing his part to drive up nat gas prices. YAY!

    Says that “latest science” shows that fracturing poses an “unacceptable threat” and “horizontal drilling and fracking shouldn’t be allowed.” Says his team has identified 6,000 gas wells in the watershed area.

    Thank you, Paul. You are truly a “Useful Idiot.”

  119. re 118 = lol

    Market / group peeling away from highs as we go into the last hour of the day. We get wholesale inventories and federal budget data tomorrow, not exactly earth shaking stuff usually. We also get API after the close and EIA tomorrow.

    EIA put out it’s STEO earlier and sees oil consumption growth for 2010 up from 1.2 mm bopd last month to 1.5 mm bopd in this report due to a higher GDP forecast. I’ll have more STEO changes outlined in tomorrow’s post.

  122. MMR DJ update — still hearing they have not begun to set pipe yet. “Conditioning” the well bore. This is taking a lot longer than people thought. But, so far, no problems…. just s-l-ooooooooooooooooooo-w.

  123. Ard hasnt bounced back from a 10 dollar, 25 % shellacking.

    Ive asked myself what happened to this name and why did the market react the way it did.

    Imho, the downdraft that Ard experieced was caused by an earnings miss for q4

    Analysts had it at .35 cents and they came in at .24.

    Lets look at the miss:

    11 cents is 4.3 m in net income and 6.9 m pre tax

    What happened:

    reserve write downs (price and performance) so dda went up from $14 boe to $24 boe in q4 to adjust the full year totals, (and will be $19 in 2011). Most companies would break out that impact as a separate line item or at least add it back to get to pro forma earnings. ARD did neither. They just reported as higher dda like it was an on going operating cost That accounts for 5.9m of the 6.9m miss. The other 1.0 m was non cash ga stock option expense.

    So even though the 4 qtr was missing 55,000 boe due to shut in , the earnngs miss was caused by non cash ga and non cash dda.
    The the stock gets hamerred on the miss and mgt on the conf call talks about all their operational issues.

    I never heard a company on an earnings call belabor all their operational issues– Imho, the call spent too much time on it.

    Now beyond the operational miss, and back on reserves, reserves were written down due to performance to 28,000 eur per well. I believe it was at least 30 k per well priot to that. Mgt thinks they can get it back once they address the electricity issue.

    Now q4 ran at 65 boe, oil now is 80, their differentials are 4 bucks so they are getting 76 on oil for 90 % of their production. Production should increase 30 % in 2010

    Tph is concerned about loss in reserves and implies valuation should be calculated on a reserve basis (not cash flow)

    If they drill 300 wells and each well is 28.0 k they should be moving 840,000 boe to proved producing from pud for a cost of 200m.

    Cash flow for q1 should be close to a dollar a share

  125. #118-I think the term “Useful Idiot” is the term of the day-I am very concerned, however, that that term applies to the majority if not all the politicians and bureaucrats at all levels.

  129. He did say natural gas has an important role to play, too bad CNBC doesn’t know what questions to ask him.

  131. Maria B’s question about do we have enough oil, right now, this minute was about as dumb as her declaration that the recession was over when Lehman got it’s last secondary priced.

  137. KOG — one of their largest shareholders in the market, buying today… tomorrow…

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