Wrap – Week Ended 04/09/10

166 thoughts on “Wrap – Week Ended 04/09/10”

1. Skimo – can you repost that on today’s comment section?

2. Futures coming off after the jobs data, dollar lower as well.

   DVN should see standout performance today and if we get a bounce from the open, subject to “strong get stronger” action.

3. JB – NFX through your resistance level and on strong volume yesterday. This morning’s futures dip notwithstanding, this looks like the long awaited breakout to me. Especially encouraged by the volumes which I think are a function of great acceptance of another large play for them at the nascent stage in the S. Alberta Bakken. See comments in post today from their recent RJ presentation.

4. JB – sent that email.

5. Z, took the below from the CLNE 10K, while I understnd that management there has a certain perspective and story, I’d be interested in your assessment of the “surplus of supply vs demand” comment.

   A 2008 Navigant Consulting, Inc. study indicates that as a result of new unconventional gas shale discoveries from 22 basins in the U.S., maximum estimates of total recoverable domestic reserves from producers have increased to equal 118 years of U.S. production at 2007 producing rates. The study indicated a mean level of reserves equal to 88 years of supply at 2007 production levels. According to the report, shale gas production growth from only the major six shale plays in the U.S., plus the Marcellus shale, could become 27 billion cubic feet per day and as high as 39 billion cubic feet per day by 2015. Navigant has also indicated that development of the shale resources base has resulted in a substantial current surplus of gas supply compared to demand of as much as 11 billion cubic feet per day. These current surplus levels are 18% of annual average historical U.S. consumption levels of approximately 20 Tcf per year; providing sufficient gas supply to meet the requirements of all existing markets and to meet new market requirements.

6. Z…as we pull out of this recession do you see most of the companies we follow regaining their highs of ’08> ie Like BEXP has

7. Skimo – will address within the next hour.

   K – For most I think it will take longer, probably into 2011, not that prices for the commodities will eclipse 2008 then either but with production growth and lower costs, I think that’s your time frame. I think they make gradual progress towards it this year.

8. ZTRADE – ZIM – DVN

   DVN – Added (10) April $75 calls for $1.94 with the stock at $73.20. See site for details on their transaction with BP this morning. I may add more calls or divest myself of these during their call later this morning.

9. Z: Do you have a top few names that would a good match to be taken to the alter by DVN. I assume these sales have to close first. Does that put a slight bid under the NG names trying to figure who might be next?

10. Very interesting read:
    http://www.usatoday.com/tech/science/2010-03-11-quakes11_ST_N.htm
    Now if an E&P could develop a hurricane machine, they would rule the world.

11. Re 5 As you indicate management is talking it’s book to a certain extent.

    Most people think there is a 100+ year gas supply from the shales. I think you don’t see it drilled up all at once as many of the shales are higher cost and economics don’t warrant further increases in production at current price levels for gas and services. We are in the pre-gas as a transportation fuel era having just gone through a period of fast landgrab. The necessity to drill to hold acreage has resulted in higher production at the same time as the recession has suppressed demand. So the surplus they talk about will not always be there and I would argue is much smaller than they portray it as. I think we do see transportation become a more significant component of demand over time along with a continued increase in electricity. After next year, most drilling obligation pressure subsides so look for E&P discipline to return in a big way if demand/prices have not rebounded.

12. Tom – I’ll hold off on that one. Don’t know that it would not be oily names they’d target as that is more popular at present.

13. ZTRADE – ZIM – DVN

    DVN – Added (20) March $75 Calls for $0.50 (on the mid and easily) with the stock at $72.50. Call at 11 am EST.

14. Jason – long time no comment! Yep, saw that, another thing for Waxman to investigate no doubt. I think zero, zilch, nada comes of it.

15. Nicky – day so far playing out as you thought.

16. Z: Heard Floyd is starting to sound like Aubrey @ the RJ conference. Upset that his good execution is not being rewarded.

17. is there a replay for 16

18. NFX – moving on up here. Interesting greening of the group going on.

    Headlines blaming China prices for the decline in markets early, I’d add Dodd’s last dash push on financial reform to that.

19. Had a mtg this morning… back now. Love red days during a economic recovery. Gives you the oppy to buy stuff at lower prices.

    Buy on Red, sell on Green.

20. Z: from yesterday — I would like some more colour on the refinery sector. I don’t really follow the sector, but I am a sucker for stocks or a sector that has lagged the market.

21. PS on the refinery stocks: I know there are some chartist here (not me), but check out yesterdays price action in FTO. If that is not a breakout then I don’t know what a breakout is.

22. Cracks have bottomed for the time being and are heading higher seasonally. I’m going to be slow to act as this sector is fraught with head fakes. In my list of things to happen for 2010 at the beginning of the year I said we’d get a Spring time rally in the group and that looks to be happening. Most liquid plays are VLO, TSO, SUN and I think there may be some potential short covering in each as well as people playing for a quick pop. They are beaten down for good reason and I very much doubt the out year earnings estimates that call for a sharp recovery in EPS.

23. Bill – it’s on their main page:

    http://www.petrohawk.com/home/

24. DVN- stock up but not by much. Big questions for the call, what do you plan to spend the proceeds on, debt retirement, oily assets, buyback? Please don’t say more gassy stuff.

25. Z, thanks for your perspective, insightful as always. CLNE is certainly a high growth opportunity, my biggest concern is that mgt might be spreading themselves a little thin with the BAF acquisition-while vehicle conversion is related, they should be focused like a laser on their primary mission of gas sales expansion and associated construction. Just my humble opinion.

26. Skimo – I tend to agree. I don’t see conversion as a big driver, maybe I’m missing something. Wondering at liability and warranty issues surrounding conversions…could see nasty can of worms there.

27. Skimo – and could not agree more about focus with these little names. Too often the mainline grows slower than they want and so they branch out into things that look like they make sense or could provide near term revenues, often to their detriment. Reference EEE, clean coal company, branching into emissions credit trading.

    NG inventories in 1 minute.

28. EIA Natural Gas Inventories:

    111 Bcf, right in line.

29. Interesting meeting with an energy CEO this morning. He asked me what I thought of the shale players. I asked him back. We both agreed that you had to run awfully hard, just to stay in place. In the long run, there are going to be companies who can’t keep up that pace on the treadmill. People are underestimating the decline curves there. That said, he is a traditional e&p (no resource plays), lamenting why no buy-sider is interested in his company. So, he is talking his book. On the other hand, he sits on the BoD of a large e&p who fairly recently made a big move into one of the shales. Got the sense he was one of the nay-sayers on the Board. Interesting stuff.

    But, that’s a pretty long-term outlook. Anything longer than a month, mrkt doesn’t care about yet.

30. Storage now at 1,626 Bcf

    down 4.2% from year ago

    up 1.2% to the five year avg.

    CNBC didn’t bother to report it.

    NG down 6 cents before and after the number.

31. Thanks much BOP, keep it coming. Any tidbits are a help to the whole. Shale hyperbolic declines are going to be a real headache for growth by 2012, yes you built it up but how do you maintain that pace and why would you want to if it depresses price? Oh yeah, you wouldn’t. Definitely a pinch on the all conventional players in the meantime.

32. What is going to be the catalyst to to change price action on NG?

33. Good post today Z.

34. DJ update. Started pulling out of hole to run liner. Will circulate with drillpipe at bottom of casing to check for flow(gas kick) assuming all is stable will cotinue out of hole to run liner.

35. He had a very interesting observation about CHK’s shale holdings. Said there was “no way” they could hold onto all that land. Wondered out loud, why they leased up that many acres. Got the sense that he didn’t hold any CHK in his P.A.

36. reef — the pace at DJ is agonizing. But, the scale of operations there is just mind-boggling. Thanks for the reminder.

    So, given where they are now, how long to set and cement pipe, you think?

37. VTZ – tell me exactly what you liked about it and I will do it every day.

    Eld – the 80% of the production base declining. Overall U.S. production declines by about 35% (conventional wisdom from the big E&Ps) per year. That’s conventional and resource play (mostly shale) production. So if you didn’t drill it for a year production falls like a stone. Now, the shales decline at between 75% and 85% their first year and then it softens into a long tail, 20 or 30 years long depending on the play. So that conventional wedge, which has been neglected for the last 18 to 24 months is probably coming off at 25 to 30% while the E&Ps focus on drilling the heck out of their shale acreage. The shale piece of the pie can grow quickly but it doesn’t stick around. It is masking the decline in the larger piece of the pie. But the decline in the larger piece is inexorable. Don’t ask me when this happens as I thought we’d see more evidence of it before now but I’m thinking sometime this year, it becomes more evident, especially in Texas, Wyoming, and New Mexico.

38. Re 35. Simple answer would be that they thought they would be drilling it at $8+ gas.

    DVN call in 15 minutes. If they say oily focus for capex and production growth better than 3 to 5% (pro forma) the stock should start to move on up. They have certainly streamlined the company putting themselves up on the list somewhat as an acquisition candidate, not sure there is a buyer willing to eat them at this point.

    Reef – good update, maybe next week for a pr? EXXI greenish for the first time in days.

39. as always, thank you for your thoughtful answer

40. CLNE breaking out by the way.

41. NFX looks like a breakout to me now and while I can, as West said last night, hold my own as a chart guy, I don’t play one on the internet.

42. Interesting thing about today’s gas number:

    Gas weighted HDDs

    Last week: 182
    Last year: 192

    Withdrawal from storage both years: 111 Bcf

    Seems awfully coincidental. Also points to increasing tightness in the market (either supply coming off from year ago levels more than the EIA is showing or a good sized ramp in demand).

43. DVN calls = nice use of the ZIM concept.

44. RE 37:
    1. I like hearing a more detailed “market sentiment watch” to understand your feelings (whether I agree or not).
    2. Conference call wrap elaborates on overall stock specific opinion/sentiment
    3. Good high level breakdown of the deal and its relevance

45. BOP – thanks and don’t get me wrong, the ZIM is not a day trading vehicle as much as it is a “I think they’ve got this all wrong” vehicle. It may take until Monday (given that it’s Thursday) for analysts to write up favorable opinions. But either way, I won’t sit in the options too long, waiting for people to see my wisdom, lol.

    VTZ – thanks very much. Any thoughts on what DVN is getting for their $500 mm in the JV with BP?

46. DVN call starting now:

    http://phx.corporate-ir.net/phoenix.zhtml?c=67097&p=irol-EventDetails&EventId=2798824&WebCastId=974091&StreamId=1456834

47. BOP, Re #36:
    At least a week, more likely 10 days-2 wks. A normal protection pipe run at 12,000′ w/9,000′ open hole usually takes about a week from the start of tripping out of hole until everything is done and you are ready to start drilling or testing.

48. DJ-guessing actual costs are $130MM to date….

49. jy — thank you. It has been going slower than even some of the partners thought. But, have to keep the sheer scale of the project in mind.

    Does your 2 wk timeframe include hole conditioning? From what I understand, that part is already done.

50. DVN Strategic Repositioning Notes:

    This new way forward was announced mid Nov 09

    Plan was to sell all Gomex and Int’l assets

    Strong balance sheet, low cost structure

    Production goes from 37% liquids to 32% liquids immediately. That’s a known issue. Question is go forward plan.

    Estimated after tax proceeds from all sales is $7.5 to $8.3 B. The midpoint of this range (and there is about $1.2 B left to sell from the Gomex Shelf and in China) is well ahead of the early estimate of $4.5 to $7.5 B after tax proceeds.

    …..

51. DVN drifting higher as the call progresses, I’m about a third of the way through the slides but all are accessible now.

    …

52. DVN Notes:

    Proceeds – debt reduction and capex originally. What to do with the extra (incremental) proceeds? More capex, more debt reduction, and adding share repurchases. Glad to hear that last.

    …

53. reef — what are we thinking about reserves/well now… 150Bs or so? If DJ costs $150 to drill and complete (ignoring the infrastructure and processing plant that have to be built to service the entire field), that means about $1/mcf development costs.

    What is it in the Haynesville again?

54. DVN Notes:

    See the deal as reserves accretive in 2010 now, instead of 2011 and highly accretive to earnings, CFPS, and production in 2011.

    Stock back up to $73.

55. BOP – Average (core and non core) would be closer to $1.25 off top of my head, will go check another source after this call.

56. yield curve near record-have not seen bond auction results.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=akoqy_5Mybyw&pos=2

57. z — just want to keep things in perspective here. thanks. no hurry. this is loooong term stuff.

58. 53- after EXXI investor day, looking at 200BCF/well. Infratucture for field(say 20 wells tied back)is estimated at $300MM. Thats about $3.3B for the project

59. DVN Notes:

    Kirby Oil Sands JV with BP – DVN to operate.

    Jackfish expansion on target.

    Jackfish said to have best (low) steam/oil ratio (means lower cost production as you don’t need to burn as much natural gas to make the SAGD work)

60. Out EPL on big move, buying more TAT

61. choices — thanks. saw that this morning… what VTZ was point out a coupla days ago. And the treasury is doing most of it’s funding at the short end of the curve… so this masks the REAL COST of our deficit.

    And yet… congress continues to pump out spending bills. If an individual did this, we would be thrown in jail for writing bad checks. Frankly disgusting.

62. re #9 – have heard XEC FST and NFX thrown around as possible DVN targets

63. DVN Notes:

    Hedges:
    Gas 55% of production hedged at $6.12 floor
    Oil 71% collared between $67 and $96

    Strip price growth:
    6% CAGR for 2010 through 2014. This was 3 to 5% near term before, not sure what the long was.

    In a higher price case they are looking at a 12% CAGR through 2014.

    F&D for 2010 goes from $13 to $15 / BOE due to the additional cost of Kirby JV and the fact that 2010 will see no bookings there, that comes back down in 2011 as they will spending less and book reserves.

    So DVN is now Barnett, Haynesvill, Cana Woodford, Arkoma, Horn River (Can.), oil sands (Jackfish and Kirby in Can.),

    They put risked undrilled locations at 32,620 in North America.

    Q&A starting, DVN at $73.12.

64. DNR: now that the merger with ECA is complete, you Bakkan catalyts types might one to keep an eye on DNR. ECA did not really do alot with its acreage in the Bakkan. If memory serves that acreage is located near some of the big BEXP plays. Of course, does DNR have the operation ability of BEXP (who ever thought someone would say that?) is another question. It is questionable that this acerage is priced into DNR.

    I was NOT in favor of this transaction with ECA. But that is for another day. This post is just a heads up that DNR now has Bakkan acreage that might cause some “surprises” in the stock.

65. DVN puts total risked resources at 13.56 billion BOE of which 2.6 B BOE was booked as of 12/31/09.

66. DVN – sort of demurred on adding oil exposure in the U.S. The question wasn’t asked directly but they should have read between the lines and it sounded more like they plan to modulate their gas directed capex by a little or a lot depending on prices.

67. RE 61: Exactly my point from a couple of days ago I see the gap only widening in the intermediate term and probably short term.

    RE 45/59 Kirby: Buying what can essentially be turned into heavy oil reserves. With the light to heavy the way it is, these insitu projects are great moneymakers. In terms of valuation metrics, I have not had time to evaluate the deal and I haven’t been able to find acreages, etc… At a high level, these are higher cost projects (than say Bakken) but make good returns for a long time and generally have good expandability once the facilities are in place.

68. DVN Q&A – the rest of the asset sales are going to occur throughout this year, data rooms still open, no hard dates for bid returns set.

    VTZ – acreage is said to be “big”, did not see a number yet, but it covers an area on the map that looks to me like 2.5 to 3.0x that of all of Jackfish.

69. I’ll pull out my map and see if I can work something up. To me, all the oil sands reserves are crazy undervalued at these prices, but call me biased.

70. Hey VTZ: any view on CVE (spin off of EAC)?

71. BOP- How tight is the spread from corp to govies and what is the normal spread. I am hearing that it is tight.

72. DVN – saying it can grow Barnett production for quite some time, if they decide to turn the dial on capex.

    What areas would you like to move into? Don’t really see any holes in out portfolio. Always looking. This was another attempt to get them to talk about oil exposure, didn’t work.

73. For anyone who likes the thrill of day-trading, seems to me you sell EXXI and swap into MMR here.

    I’m not a day-trader. But for anyone who is good at that, what do you think?

74. DVN Q&A – what about more oil balance? (finally a direct question, or put another way “why don’t you focus more on oil like all of your peers are squawking about?”)

    They dodged it again, said they will maintain “that good balance between natural gas and oil” going forward.

75. CLNE…running like H. Bolt babeeee

76. FSYS following CLNE shadow

77. DVN call not yet over… best guess is it moves with the market with a positive bias in the morning but probably not a big breakout. Maybe it goes to $75 but the call is kind of snooze-worthy for such a big deal. The reaction post call will pretty key.

78. Kirby deal seems like good validation of CNQ plans, but also call me biased.

79. DVN slides 11 & 12 expecting $75/BOE in further asset sales?? ($1.65B midpoint for 22mBOE.) Am I doing something wrong here?

80. DVN call over, stock at $72.75, let’s see what the lunch time squawk does to it.

81. GMXR running into the earnings call with strength. Z can give you comments on what you would like to hear from them?

82. RMD – remaining assets are 77 mm boe, with a guided sale proceeds range of $1.0 to $1.4 B, pretty conservative. On the mid that’s $15 / BOE, post tax.

83. Al – 1) make your number 2) don’t increase capex here and plan to staying within cash flow, 3) another couple of high rate Haynesville wells. But lemme check my notes.

84. RE 70: I haven’t done my own due diligence on it yet although it definitely has a wide array of expansion opportunities. In the long term it will do great.

    I know someone who was loaded on ECA pre-split and sold the ECA and kept the CVE.

85. VTR: Thanks. Spin-offs often make their best moves in their second year. So you have alot of time yet — lol.

86. Z – RE Kirby: It’s safe to assume that an NPV for an average project at the current prices and light:heavy different would be in the order of $2.50/bbl assuming a capital cost of ~$40,000 per flowing bbl and a 10% discount rate.

    I can’t find any real info on projected steam ratios, acreage etc.

    Let’s say 30 kbpd Stage 1 you will net $27 M/year NPV assuming a 10% discount rate, after capex (of $1.2 B).

87. Basically $500 M should mean ~200 M recoverable bbls as their share.

88. NG off 14 cents after the numbers. Too warm outside, people thinking that’s the last of the big draws on storage for the season with a few weeks of small ones left.

    SWN not carrying through today as a result.

    Thanks for 86 and 87.

89. #83 – i agree on all Z’s points. AT one of the conferences recently i think they were talking about leasing out a rig to another operator. That might help them in the “live within cash flow” metric. No salesmanship talk and no pounding any tables about how no one realizes how much their stock shuld be trading for.

    I think today’s action in GMXR is some short taking profits before earnings.

90. DVN so far not getting much play post call, will give it a few more hours before I decide to add, hold or quit the position. Probably hold through the morning. What I heard was pretty good overall, very good on the sale prices, good on the heavy oil JV and pretty good on vision going forward. People have trouble getting excited about an oil project in Canada that probably doesn’t become meaningful for 3 or 4 years, so let the analysts crank it through their models tonight and see if we catch some adjustments in the morning.

91. Hey BP: if you are not yet down throwing around your money, there is a nice little shale play outside of Paris. Just think of Paris in the Spring.

92. 82 I need to slow down and read these tables more carefully! Sorry.

93. Market very much in lull mode. Grabbing some lunch.

94. ZTRADE – ZCAT – MMR

    MMR – Added (25) March $19 calls for $0.29 with the stock at $18.10 in what looks like a little impatient hands selling as we await Davy Jones news.

95. Z – In the PetroChina acquisition of a stake in the MacKay River and Dover projects from Athabasca Oil Sands Corp, they paid 0.63$/bbl recoverable. I would expect that up to ~0.80$/bbl was used in this transaction to get a project with a much higher NPV/bbl.

96. Most transactions are probably ~0.75$/bbl recoverable using slightly conservative recovery factors.

97. VTZ – so in a nutshell, you like it.

98. Definitely accretive

99. MMR…added a 30 min chart with comments, as I write, this spot is very easy to manage…nice consolidation triangle, low risk…use tight stops, to protect agaist the breakdown…

    #4 Zman, got it..thank you…

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

100. JB – thanks for stopping by, know you are busy. If you get a chance for a quick look, with no need to redo the charts, I’d like your quickest thoughts on DVN and NFX. Thanks much.

101. RE 97/98: The first problem with these projects is mustering enough confidence to spend the capital although based on their Jackfish comments they seem confident enough that they might actually do it. The JV will ease the capital burden and allow them to develop more stepwise. The second problem is the 3 year lag to get a project into production.

     For both of these reasons you can buy great assets at what I would perceive to be a significant discount.

102. RE 95: I just realized I wasn’t clear when I said “much higher NPV/bbl” I meant higher than the cost, not the other projects.

103. eia is blaming lng for low ng prices

     A strong outlook for U.S. supplies is likely the primary factor leading to price declines over recent weeks. Domestic production, specifically supplies from unconventional gas fields such as the Marcellus Shale in the Northeast/Appalachia region and the Haynesville Shale in Louisiana, has not declined substantially despite reductions in overall rig counts compared with this time last year. According to the February edition of the EIA’s Natural Gas Monthly (NGM), marketed production in December totaled 60.3 Bcf per day, a decrease of less than a percent from November and an increase of 1.5 percent compared with December 2009 (See Other Market Trends below). Imports of natural gas have also been strong recently. During the report week, net Canadian imports were 10 percent higher than the same week in 2009, partly aided by flows from the new Canaport Liquefied Natural Gas (LNG) terminal in Nova Scotia. The pace of deliveries of U.S. LNG imports in recent weeks has also increased considerably in comparison with this time last year. Sendout from U.S. LNG import terminals has averaged 2.0 Bcf per day during the first 2 months of the year, compared with 1.1 Bcf per day during the same time period in 2009. A greater number of LNG cargoes are being directed to the United States following production increases in countries such as Russia and Qatar.

104. Bill – wonder what report week they are referring to? LNG shot up when it was really cold and then shot promptly back down. Average for the last 4 weeks was 1.6 Bcfgpd, is up from 2009 and 2008 levels but below 2007s 2.0 Bcfgpd for this period.

105. 104, i quoted last week report which is 2 weeks old

106. what is going on with clne

107. CLNE – earnings last night, wasn’t on my calendar, going to listen to the call tonight, overheated for me for now.

108. BOP- Re #49. 2 week guess would include hole conditioning in a less than 15,000′ hole. EVERYTHING (operations wise) moves glacially at DJ type depths(29,000′)!

109. Gotta love what’s happening with MWE.

110. JY and BOP – all of the above being said about Davy, there is no reason for them not to go ahead and release new data on pays before they have it cased. Other than integrity of the casing checks with cased hole logs I see no reason not to tell the obviously restless natives what it is you think you’ve got. Just from a casing standpoint I mean. If they are waiting on lab results that’s another matter.

111. MWE – care to enlighten? I don’t follow that one.

112. Re: #100 DVN, NFX…

     added DVN daily, P&F and 30 min with comments…

     added NFX 30 min with short term trade perspective..

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

113. currently bid 31.52
     # 52 week 10.13 – 31.54
     # Div/yield 0.64/8.12

     MarkWest Energy Partners, L.P. is a master limited partnership engaged in the gathering, processing and transportation of natural gas; the transportation, fractionation, storage, and marketing of natural gas liquids (NGLs), and the gathering and transportation of crude oil. The Company conducts its operations in four geographical operating segments: Southwest, Northeast, Liberty and Gulf Coast. The Company provides services in the midstream sector of the natural gas industry, which includes natural gas gathering, transportation, processing and fractionation.

114. Re Davey Jones:
     There are 3 partners, 4 counting Mr, Rudman in the well. There may not be a consensus among them as to what is in the well based on the logging information. Doubt that the publics want to release anything that they all don’t agree on such as feet of pay, porosity, etc.

     I realize that consensus has never bothered Mr. Moffatt at McMoran before but this is a major step forward in the GOM shelf.

     Guess they could be awaiting sidewall core analyses (usually takes <12 hours to do 100 of them) or some sort of fluid extraction analysis. Didn't hear anything about formation tests or core samples taken in the well though.

115. re 112 – thanks, not sure if you like the NFX here as something going higher or you’re thinking it falls back to support.

     JY – they took a core awhile back, don’t think they were in the right section at the time as no news from that event. I don’t think they are taking sideway cores as JBM was hemming about it being too dangerous.

116. re 113 – oh, ok, hear ya on that. Not my area as I don’t do gathering/midstream/pipe stuff …. I know just enough about that to be dangerous. I’ll stick to my LINE for now which is also near it’s high after quite a run and which looks a lot like an E&P.

     Market drifting about, waiting on retail sales and sentiment tomorrow.

117. Re: #115 NFX, I like NFX…I think it goes higher…but I prefer to wait for pullbacks…looking at today, the $54.25 area is a reasonable short term aggressive risk…longer time frame, from here NFX stays in X’s on the current buy signal until a print of $52…so over a period of days NFX could easily retest $52-$53 all the while still be trading within a very bullish context….

118. the eia boys must of had a long lunch as the 2:00 report isnt there yet

119. JB – ok, I thought that’s where you were on it but was not sure.

     Oil inching up to flat on the day.

     NG still in the tank on the day but trying to hold $4.50.

120. z – NFX slide 7, they show a 6:1 and a 12:1. A more realistic 17:1 would show them as being even more oily. But maybe NG producers prefer not to recognize a 17:1 ratio in their color, glossy presentations.

121. Bastardi saying he bricked on March so far, calling for big storm in Jersey very soon, high winds and rain, not snow.

     His hurricane stuff continues to look for a big season. Looking for above normal water temps by July in the Gulf, from colder conditions at present. Atlantic is already getting warm. Also sees some blocking action of trade winds which keeps shear down.

122. Rob – yeah, they figure they aren’t getting credit for 12:1 so why push the case, lol. Campbell does a good job with these presentations, wish they’d leave the quarterly release to his as well.

123. Actually, this is Bastardi’s cut at the current warm temps from yesterday:

     WEDNESDAY 8 A.M.

     False Spring or real deal?

     The current warmup is very interesting in that it did not come in the normal fashion, from the big high getting over the Southeast with a big ridge over the eastern part of the nation. No, instead this is the southern end of the very warm air, relative to position, that has been in Canada much of the winter. Occasional jaunts southward have resulted in warmups, but with the normals coming up this is like a snap to spring for the Great Lakes and Northeast. However, it can only be a snap to spring, not a false spring, if it doesn’t get cold again. And there is where my problem is.

     The winter that was the closest to this over the past 10 years, in other words, colder than normal and snowier than normal in the many of the areas we saw was 2002-03 had NYC 7 above normal March 15-30. I am bringing this up because that year I did a meet and greet in Houston, and at that time I was not yet doing the same things I am doing now as far as private clientele. At the meet and greet, someone showed up from an energy company and gave me this nice crystal statue as a token of his appreciation. I said what is this for? He said your insistence that winter was coming back made me $3 million. NYC was 7 BELOW normal March 31-April 14 that year.

     Funny, when he told me this, it reminded me of those T-shirts… “My parents went to Bermuda and all I got was this T-shirt.”

     In any case I explained that while I was right, that was risky because he did not really know all the details behind it. Perhaps if he did, he would have made more, but people were screaming winter was done in 2003 and it came roaring back in for the coldest 10-day post equinox period since 1982. In 2007, the year of the brutal February, March snapped to warmer. CVG was 6.8 above normal for the month after the coldest February on record, then 13 below normal April 5-15! You can go back and look at almost all El Nino winters and find a false spring, and one more 1-2 week shot of cold that mimicked the coldest period in that winter season, before one snaps out. The reason has to do with the nature of the nino and the split in the jet, that warming coming from the north, or from ridges that are centered in the means north of the main belt of westerlies cannot simply become the mean ridge, but instead must be gotten rid of through true baroclinic processes, that will involve major cold replacing the core of the warmth. When that happens, the cooling in Canada looks for a reason to come south and that is why you should see that one more time. It’s most likely to target areas that had it worst this winter but will have to at least turn the Great Lakes and Northeast around some. Still if you live as far south as I-10, I would be in no hurry to plant yet.

     There is more than just this jabbering about the past here that supports this. The major drivers I am looking at in the Pacific all argue for the eastern trough (indeed, there will be one next week, just no fresh cold air) and the stratosphere which has still not cooled back to below normal is rewarming again. The vortex has never gotten back over the pole as it did in January, and it also appears that once the process is going, it is not a signal for anything. In other words, if the vortex had been locked over the pole the last month, I would be looking at it today and saying, “Wow, look at that. It’s signaling a colder look:”

     http://www.cpc.ncep.noaa.gov/products/stratosphere/strat_a_f/gif_files/gfs_z10_nh_f00.gif

     That is displaced about as much as it has been all winter, though it has been rolling around the pole since Feb. 1 in different places.

     In 10 days it’s in a more classic place for a winter outbreak.

     http://www.cpc.ncep.noaa.gov/products/stratosphere/strat_a_f/gif_files/gfs_z10_nh_f240.gif

     The temps are simply not that cold either… the initial http://www.cpc.ncep.noaa.gov/products/stratosphere/strat_a_f/gif_files/gfs_t10_nh_f00.gif

     shows a displaced “cool” pool, but that is no big deal as far as how cold it gets up there. In 10 days, it’s even more paltry:

     http://www.cpc.ncep.noaa.gov/products/stratosphere/strat_a_f/gif_files/gfs_t10_nh_f240.gif

     If I may add one thing… one of the main tenets of the global warming theory is that the stratosphere WILL COOL with time as the trapping of the heat in the troposphere expands the troposphere and shrinks the stratosphere (this means one raises the thickness in the column of air in the trop, which means warming in the trop, while reducing the thickness in the stratosphere and cooling it). This means there is no positive feedback going on and that lower tropospheric warming will be reversed on a global scale, and soon and perhaps in a more dramatic drop-off than we saw after the 1998 El Nino. Another example of why you have to think globally to forecast locally.. so to speak (many thanks to my friends from Wilmington. Del., who sent me my sweatshirt that says that.. a great point!)

     So is winter over in the areas that had all the cold and snow this winter? I don’t think so, but we are a heck of a lot closer to it being over than we were when it was warm in November before the December to remember.

     My theory on the upcoming storm does not look to be right as far as the sneaky cold air arriving into the storm from the north and east. I thought, and did so from last week, a short wave would come over the central Canadian ridge and dig southeast to the maritimes with a fresh high taking over in the St. Lawrence Valley, feeding cold from the northeast. The euro model run from 12z March 8 supported that, but at this juncture, I see no model doing that. Instead warm air comes around the top and it “rains” itself down to the cooler, and without fresh cold injection, the storm does not continue to deepen, nor does it get cold enough for the kind of snow that I was envisioning. But I will let it ride for a couple of more runs as there is a short available to do this; it’s just that the modeling cannot see it digging the way I thought. At best I am being questioned, at worst my idea is completely in error on that, even though the upper low goes to where it’s supposed to and the storm passes south of New England, or at least most of it.

     Thanks for reading. Ciao for now.

124. DVN just not doing what I was thinking it would do. Will give through the morning before making a decision there.

125. Davy Jones — no side wall cores, no (successful) formation testing tool runs, physical core not taken in a prospective zone (it was a “shot-in-the dark” so no surprise). Not exactly clear yet how and when they are going to do a flow test. But they WILL run a flow test, at some point.

     Logs are telling you there is at least 200+ ft of pay, using a conservative cut-off for porosity. EXXI publicly said 240+ ft… but that will probably prove to be conservative too.

     There are 6 partners in the Davy Jones well — MMR, PXP, EXXI, Tex Moncreif, Nippon Oil, and a group of NY hedge funds. Interestingly, it sounds like Flores (PXP) is not focused on the well at all. But I think Moffett and Schiller are BFF and talk every other day (if not daily).

     They have moved a rig onto the 2nd location at DJ and have (or about fixin’ to) spud this deliniation well.

     Lots of news to report, when MMR finally gets a round tooit.

126. KOG…talk on board yesterday about them possibly acquiring Peak…located that companies website and so forth. It would seem that the Dunn County stuff would fit in nicely…do you think they’d possibly take the whole company or just the Dunn County stuff…and if I might ask is that rumor something you’ve heard or just something you think would fit?

127. For those who believe the US govt is heading to BK, as I do,this web site may be of interest.

     http://trueslant.com/michaelpollaro

     http://trueslant.com/michaelpollaro/files/2010/03/Austrian-Money-Supply.pdf

128. Well, predicated upon volume and price we are getting a little preview on ATPG.

129. jivey — #126 the whole company… acreage and personel. KOG could use both. Not just idle noodling in a dark closet. Both feet firmly placed in facts. Whether it will happen or not, depends on whether the buyer and seller can come to an agreement…

130. DVN should get some upgrade and/or estimate action in AM

131. thx…BOP; it looked like a good fit from what little I could tell…

132. ATPG – freeing up quick profits on GEOI(thanks to folks here) and raiding the cookie jar to add ATPG way. Sure hope its just a bear raid into dismal earnings and not the Titan tumping over!

133. jivey — thx for looking it over! You know, the two companies also have a data-sharing agreement. So, they are in each other’s offices all the time. A merger would just formalize the living arrangement.

134. atpg, last few reports they keep talking future, well future is here, and their q4 results will be abysmal

     If the dont hook up telemark within 2 weeks this name could have an ard like move

     I think its prudent to sell before earnings and buyback after the dust settles

     If bastardi calls this right, im going to nominate him as wetaherman of the year

135. Z – ran across this a few minutes ago – i’d like to see more releases like this one.

     Marcellus Shale Coalition Statement on Calls From Obama Admin. for Increased Fracturing Disclosure

     Marcellus Shale Coalition (MSC) president and executive director Kathryn Klaber issued the following statement today in response to comments attributed to White House staff regarding the disclosure of solutions used in the fracturing process:

     “Our industry was born in Pennsylvania more than 150 years ago. Since that time, more than 380,000 wells have been drilled in the Commonwealth, the majority of which have utilized hydraulic fracturing technologies. Despite this rich history, we recognize the need to educate and engage stakeholders, policymakers, regulators, and concerned citizens, which is why we worked with the Pennsylvania Department of Environmental Protection (DEP) to fully disclose fluids used in Marcellus Shale. In fact, DEP lists these fluids publicly on its webpage. And these fluids are mandated by the federal government to be at all well locations, too.

     “The additives used in the fracturing process collectively make up less than half of one-percent of the stimulation, the other 99.5-percent is fresh water and sand. The fluids are then injected into the formation more than one mile below the surface and are fully isolated in the wellbore, which is encased in layers of cemented steel casings.

     “For more than 60 years, hydraulic fracturing has been closely regulated in each of the 27 states in which it’s commonly used. Here in Pennsylvania, this critical technology has helped produce significant amounts of job-creating energy. Last year alone, nearly 48,000 jobs were generated in the state through the safe development of clean-burning shale gas reserves trapped miles below the ground – resources brought to the surface through a combination of technology, innovation and old-fashioned hard work. Those job figures are expected to double by the end of 2010, while contributing more than $1 billion in total state revenues and $8 billion in total economic impact.

     “Effective, commonsense and proven state regulations – as well strong commitment from the industry – have helped ensure the shale gas exploration process doesn’t compromise air, land or water quality. This is simply too important of an opportunity for the Commonwealth and our nation’s clean energy future. This technology has been deployed more than 1 million times in the United States – not only to produce oil and natural gas, but to access geothermal reserves, drill water wells, and even clean up Superfund sites.

     “The MSC and our members are committed to full regulatory compliance and best management practices, many times resulting in smart regulations that have enhanced environmental protections like water recycling and reuse and enhanced well construction standards.”

     NOTE: Joseph Aldy, special assistant to President Obama for energy and the environment, “urged the natural gas industry on Tuesday to disclose the chemicals it uses in drilling,” according to Reuters

136. Isle – that’s what I’m saying but my guess it will be pretty modest based on the price action today. Unless someone is really holding their cards very closely to their vest post call.

137. Re 125. Thanks for the recap BOP, I promise not to beat the tickers to death in comments, lol.

138. Exxon spend up 4% on last year, still no reaction from the OIH.

     Common theme of conference call watch: Service is gaining traction in the hot plays from Haynesville to Marcellus to Bakken. Not that BEXP upped their estimated costs slightly assuming that some of the cuts made in 2009 will be reversed later in 2010 as the Bakken grasps for more drilling crews, more frac crews etc. Service stocks just not reflecting this yet.

139. z — i only have so many “best ideas.” So I will beat that drum, until I find a better one to beat. Beating tickers to death is my MO. And I put my money where my mouth is.

140. BOP – I didn’t mean for you not to do it, lol. I just meant that I would not do it. I plan to beat MMR to death, not EXXI, lolol.

141. Good. I LOVE the smell of “conviction” in the morning!!

142. most things greening slightly into the close, DVN falling back to even. Must admit I’m pretty surprised by that.

143. ATPG – Once in a lifetime opportunity to find out if Chm Bulmahn’s 9 million $ sale earlier this year was truly for estate planning purposes?

144. Talk about a pump job, S&P at 1149.9 moving into the close.

     I was sent this last night by JD:

     “Today’s Statoid: Since 1987, the S&P futures have only twice posted nine consecutive higher closes (in 2003 and 2009). Only once has the index posted 10 consecutive higher closes (January 1987). Eleven consecutive higher closes has never been done. A higher close today would be the ninth consecutive higher close. It is worth noting that 16 of the past 18 sessions have had higher closes, for a stunning 103.90, or 9.98%, rally from Feb 5, 2010.”

145. elijah — keep us informed on ATPG, ok? I’m interested in hearing what you think of the quarterly results. Thanks.

146. SD showing a little life the last few days-have not seen any news.

147. choices — #146 if i had to guess, i would guess the filing on 3/8 by Mount Kellett Capital — almost doubling their holdings in SD, to become the 2nd largest outside shareholder — has something to do with it.

     Did I mention (lately) that Mt Kellett is also the 2nd largest shareholder in EXXI? Yep. I think those guys are smart. And they only hold 5 stocks in that fund. Talk about keeping it down to JUST your “best ideas.” wow!

148. CNBC sending out alert that the 1,150.24 close on the S&P is the highest level since Oct. 1, 2008.

149. The mrkt started to climb, about the time this ruling came out… you think people aren’t watching Washington’s every move??

     http://cdn.rollcall.com/media/44110-1.html

150. For further edification of comments to EL D on declines, HK has a good slide in their latest presentation showing a type curve for a typical Haynesville well:

     Yr 1 declines 82%
     yr2 45%
     yr3 30%
     yr4 22%
     yr5 18%
     yr6 15%
     etc, etc, etc…

     According to HK, 80% of EUR of the well is produced in the first 10 years.

151. BOP- RE #125
     OOPS! I swapped Rudman for Tex Moncrief when I replied earlier. Didn’t realize Nippon and hedge funds were also in well. Should have suspected private equity. That would be Moffat’s MO.

     I’d still guess the publics in the well are getting their numbers consistent.

152. jy — it was JimBob’s was of “rewarding” his NY hedge fund buddies, as it was ‘splained to me. 😉

153. KOG on the tape.

154. well, what does everybody think about the KOG report?

155. KOG – someone taught them how to right a press release.

     Way to bullet point the issues.

     Current production double that of 4Q production and that more double year ago levels.

     More later…

156. Little light on the bottom line, but the big well in the report and the big jump since the quarter in production should help people see past that.

157. Z- you still follow FSLR?

158. KOG — bottom line a little light in 4Q… looks like they expensed some stock-based comp in the quarter. Other than that, looks pretty darn good to me!

     $25mm in cash on the balance sheet. What a difference from a year ago. And they are already at 1,500 BOEPD in production. That is half-way to their YE2010 goal of 3,000 BOEPD. That beats what I was looking for. Wonder if their wells are holding up bettern the expected decline curves? Or, if recent production has just come on stronger than originally thought… now that they have shortened the frac stage lengths.

     Nice report so far! Still reading thru….

159. z — did you ever follow the old Nuevo Energy??

160. FSLR – I keep an eye on it, I think it goes lower long term.

     The old NEV, yeah, I had to stay awake through many of their conference calls, why do you ask?

161. tracking down a new thread… i love cheap assets. sniffing around something different. thx

162. KOG stock should open UP tomorrow. If it doesn’t, then someone is confused…

163. KOG…added a new longer perspective daily chart with comment…

     Zman…I sent an e-mail follow-up…

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

164. Saw that JB and thanks, will get back to ya tomorrowish.

165. … and thanks for the chart on KOG.

166. GMXR on the tape late, with restatements of 2008 and 2009 quarterly results. Messy but non cash charges. Thoughts on the numbers and the plan in tomorrow’s post.

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