Market Sentiment Watch: Market continues to grind higher, feels/is less participatory, especially for energy, than it looks.
OPEC Watch: 156th OPEC Meeting: Not surprisingly, OPEC left quotas unchanged. No change in quotas was expected from this meeting and in recent days, Saudi's Al Naimi and OPEC ministers from other member countries have expressed contentment with current oil prices, saying they see rising demand and no reason to change output quotas this year. OPEC will next meet October 14th.
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today – TAT, SSN, Gulf of Mexico Central Lease Sale 213, BEXP takeaways
- Odds & Ends
Holdings Watch:
ZCAT (Zman Catalyst portfolio, formerly the $10KP II):
- $11,500
- 43% Cash
- Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
- Yesterday’s Trades: NONE
ZIM (Zman Inefficient Markets portfolio)
- $10,500
- 76% Cash
- Yesterday’s Trades:
- BEXP – Added (10) $17.50 April Calls for $0.95 with the stock at $17.10, off a dime, after reporting another good set of wells and making an acreage acquisition. See today’s post for more details but suffice it to say that I think market conditions and not the news here are moving the stock at the moment. The company continues to report improved completions and de risk it’s acreage systematically and I expect more catalytic news in the near future.
- BEXP – Added another (10) BEXP April $17.50 calls for $0.95 with the stock flat. Additional news from CLR should be helping derisking future drilling targeting the Three Forks Sanish in the company’s Rough Rider area.
Commodity Watch:
Crude oil rallied $1.90 to close at $81.70 yesterday, on strong equity markets and a weak dollar. After the close, the API released another fairly bullish looking report (see below) and with OPEC doing nothing out of the expected at today's very brief meeting oil is free to move about with the equity markets again with an eye of course on today's EIA storage numbers. Note that many technicians have become more concerned about the dollar again, which appears to be moving closer towards a near term break or hold of support at about 79.50 on the dollar index. This morning crude is trading up 50 cents.
Natural gas fell $0.04 to close the day at $4.35 yesterday as mild weather continued to keep the bulls away. Meanwhile insurance premiums for Gulf operators and rig outfits continue to rise as more forecasters get on board with the concept of an active Atlantic hurricane season. This morning gas is trading off a penny.
Early Read On Natural Gas Storage: The Street is looking for a 35 BCF withdrawal for tomorrow’s report. Monday I wrote that the weather last week “should yield a fairly small withdrawal this Thursday, probably in the 20 to 50 Bcf range.” I'm leaning towards 30 to 50 after viewing the wimpy looking import figures for last week.
- Last Week: 111 Bcf Withdrawal
- Last Year: 42 Bcf Withdrawal
- 5 Year Average: 53 Bcf Withdrawal
- 10 year Hi: 149 Bcf Withdrawal
- 10 year Low: 14 Bcf Withdrawal
Oil Inventory Preview
API Watch: Pretty bullish on the surface. We're at that time where gasoline inventories and demand mean a lot more than what happens with distillate demand.
- Crude: UP 403,000 barrels
- Gasoline: DOWN 3,654,000 barrels
- Distillates: DOWN 756,000 barrels
Stuff We Care About Today
Gulf of Mexico Central Lease Sale 213:
- Basic Stats: 468 blocks out of 6,958 blocks up for lease were bid upon, or just 6.7% - this is the second lowest interest level for a Central planning area sale in the last several years. Blame gas prices or the shifting royalty landscape for that. Probably a good thing for the guys bidding.
- Link to all the LS213 data here
- Link to the broadcast here (click on Lease Sale tab at left) call begins at 10 am EST
- Why do I care about this in the slightest?
- I have an interest in MMR and EXXI calls and common shares.
- There are a number of blocks in the South Marsh Island area around Davy Jones that the group may choose to bid upon
- Specifically Blocks 220, 221, 232, and 245 are in close proximity to Davy Jones and are unleased but up for leasing with this sale.
- Specifically Blocks 220, 221, 232, and 245 are in close proximity to Davy Jones and are unleased but up for leasing with this sale.
- If you are listening to the sale they will call out the bids by operator number and lease block. The relevant operator numbers are:
- MMR is 02312
- EXXI is 02375
- PXP is 02702
- MMR is 02312
- I have an interest in MMR and EXXI calls and common shares.
BEXP Takeaways From Yesterday (just wanted to reiterate a couple of things that weren't stressed in yesterday's post)
- CLR's Obert 1-13H, a Three Forks Sanish well located on the northwest edge of Rough Rider, IP’d at 896 BOEpd. One of the big catalysts that can unlock value for BEXP is proving that the Three Forks works over in Rough Rider, as they have done in Ross. BEXP’s first TFS well should spud very soon and will be highly watched. Having this offset acreage well come in should be deemed pretty positive here but so far, due to the type of market day we are having, no joy. I will add more in the ZIM soon as again, this is a case of inefficient markets.
TAT Operations Update
For a brief background here see my initial look at TAT here
The Numbers: Company announced the will miss filing their 10K in a timely fashion because doing so would cause the company "unreasonable effort and expense". That in a nutshell in boiler plate language, and quite lame. If you are going to miss your filing time at least take the time to pen a decent paragraph as to why that is. Irritating but not altogether uncommon from the little E&Ps.
Turkish Operations Update
- Selmo Oil Field, Southeast Basin, Turkey:
- Production was 1,715 barrels of oil per day in early February
- Recently topped 2,000 bopd - due to infill drilling
- Expect to top 2,200 bopd "in the next several weeks"
- At last update plan was to increase production here to 6,500 bopd by year end 2011 by drilling 18 infill wells in each of 2010 and 2011.
- Production was 1,715 barrels of oil per day in early February
- Arpatepe License, Southeast Basin, Turkey:
- Arpatepe 1 well now flowing 500 bopd gross, TAT should have 50% WI here; this is after acidizing the well to clean it up, initially flowed 440 bopd.
- Arpatepe 2 well cleaning up. This one initially flowed 190 bopd.
- Arpatepe 3 well spud in December, nearing TD.
- Arpatepe 1 well now flowing 500 bopd gross, TAT should have 50% WI here; this is after acidizing the well to clean it up, initially flowed 440 bopd.
- License 4174, Southeast Basin, Turkey:
- Gosku-1. Re-entry well, still drilling, took a core in the Dadas shale - will need more on that on the call.
- Edirne Gas Field, northwest Turkey:
- Not quite sure if there is any production at this time but I think production of 7,000+ Mcfgpd (1,167 boepd) expected to begin around April 1 after their gathering system is tapped into a trunk line.
- Deeper exploratory well "appears to have encountered pay" - they'll need to provide more color on that on the call,
- Not quite sure if there is any production at this time but I think production of 7,000+ Mcfgpd (1,167 boepd) expected to begin around April 1 after their gathering system is tapped into a trunk line.
Nutshell: I never like to see delayed 10Ks. The operations side looks pretty good however after many earlier delays due to weather. I'd like to hear more on the call about preparations for exploratory efforts on License 4175 which is in big game country for oil (the Zagros foldbelt which is prolific in neighboring Iraq) and should see a well spud in 2Q10 as well as any other efforts along this vein which have been rumored. Conference Call: Today, 8:30 am EST
SSN Updates Operations (this is that little Australian player, drilling a well in the Bakken)
- Their first shot at the Bakken, the Gene #1-22H, has been drilled to the middle Bakken, with a 5,500' lateral, set for completion on March 29th. Not really news but it gives you a potential catalyst.
- Yegua (Yeah-Oh-Wah if you like to know how to pronounce things) test should spud around March 25th. Again, not really newsworthy.
- Bone Springs test shows hydrocarbons but I assume it's tight (needs fraccing), so they are looking at a late April / early May completion.
- Nutshell: So there are a few potential catalysts here on the near horizon and the stock has been running, but until they put some meat on these press releases I'd be wary of a buy the rumor and hypey press releases and sell the penny stock you really never got to know syndrome.
Coal Names - Met Coal In Big Demand. I missed the last bit of the run in the coal names and don't see a need to chase them on the MEE acquisition news out last night. I'd prefer to let the names settle down. WLT has had an incredible run and will likely continue to be the focus of more takeout speculation.
Odds & Ends
Analyst Watch:
- AEZ - upgraded from Hold to Buy at Wunderlich, target goes from $4.50 to $7.00 as well in the wake of earnings yesterday.
- DO - cut to Underperform at Credit Suisse.
- RRC - initiated at Buy at Canaccord
Housekeeping Watch: I will be away on Spring Break the week of March 22 meaning I will monitor the site and post occasionally during that week.
z — thank you for the summary on the GoM lease sale this morning. Hopefully someone will catch the relevant DJ blocks for us. But, think we will see comments post sale. Tonight. Tomorrow morning. But there are several things to talk about. Including having successfully set the last string of casing at Davy Jones. So drilling rig should be mobilizing and headed off to spud Davy Jones the 2nd.
do you kno wwhat the opeator number is for contango?
Someone coined the term Bahken light. Is bexp in the “more desirable” area
EXXI — I see that Schiller (CEO) has entered into a 10B5-1 trading agreememt. UBS will sell 100,000 shares of EXXI for Mr. S then inform the company of those sales. So, we will be seeing a string of Form 4 sales. Don’t like it… but the guy’s gotta fund his e-x-p-a-n-s-i-v-e lifestyle. (A new jet, John?)
Contango = 02643
TAT call starting.
EOG coined that for Parshall which they call core. BEXP’s wells would be mostly in the light area, and their wells are coming in bigger than EOG’s. Go figure.
TAT
Arpatepe – very encouraged by clean up.
License 4174 – very rich core in that shale, drilling into the same pay at Arpatepe now, should have news in a week or so.
Edirne field gas sounds like 30 days out, so a little behind there.
z do you agree with tph
Reshuffling the Bakken deck – BEXP still top Bakken pick; but CLR now ahead of WLL in Bakken pecking order. Since TPH Williston report, BEXP +30%, WLL +9%, and CLR -3%. After scrubbing all models for y/e updates, we’re more constructive on CLR, who’s positive y/e ops update was largely ignored by the market. Still Buy BEXP with 33% upside to $23 NAV. Accumulate CLR with 27% upside to $52 NAV (+$5/sh) and WLL with 23% upside to revised $98 NAV (+$8/sh).
TAT – 4175
late second quarter, no change there.
Reserves: Selmo reserves dominate the reserve report, Arpatepe reserves not in for acidizing as that was done after year end.
At the Edirne deeper gas well, still logging, definitely have pay in the shallow, encouraged by what they are seeing in the deeper section … could have more to say in a few days
Arpatepe 3rd well – along trend, east of the first 2 wells by about 5 miles, so they are trying to stepout and delineate how big the field is.
re 7: No, not really. I don’t get why they’d put CLR ahead of WLL. Is it due to the larger acreage they hold? WLL is cheaper on CF. Stocks trade on CF probably 75% of the time with catalysts and the occasional nod towards NAV making up the balance. CLR is expensive to WLL by far on forward CF. WLL is also doing very good tertiary recovery work. But aside from that, having 200,000 + acres at the Lewis & Clark area, with a 2,000 bopd IP on your first well that fracced under good conditions, with a high working interest and few others in the play, hmmm, nope, I don’t get the reshuffle.
Also, BEXP has run, I still own it sure, and I think it goes higher over time, but it is not a cheap name.
TAT – ok call, good on the ops side although still some delays at the gas field. The financials delay sounds like they are understaffed.
LS 213 Blocks receiving bids out, scanning for our boys.
And they changed the operator numbers:
Contango = 02503
MMR = 02312
http://www.gomr.mms.gov/homepg/lsesale/213/brb213.pdf
South Marsh Island (SMI) only lightly bid
MMR – bid on nothing close to Davy Jones. Block 253 bid is too far away to be attached.
Looks like they went after 3 blocks in the Lafitte area (due south of DJ) and a target for later this year.
….
Guess they have all the acreage they want tied up around DJ.
TechTrader is a gruff today. Calling for a 60/40 SHORT as the best odds day trade.
HeadTrader is already thinking about green beer. He says he would “go with the flow” today… but thinks we end higher. Euro bank stocks perky. He thinks that follows thru here.
MMR – make that 5 blocks bid in the Lafitte area. And a couple of blocks east of Blackbeard east. None of their bids are contested so they are apparent high bidder on all.
EXXI did not bid in this sale.
BOP -re 14. Right, dollars going into turning to the right and not that much more acreage.
don’t think the members of the Triad have to bid themselves. It should all come under the Area of Mutual Interest umbrella… i am guessing.
nice to see MMR rebounding a bit from yesterday’s carpet bombing… shhhhhhhhhhhhhhhhhhhhhhhh.
Thanks. Pretty quiet open for the market and the group, appropriately green for the day but not by a lot.
WLL continues to run. NFX and BEXP thinking about. MMR getting a little bounce. Oil numbers in an hour.
TAT drifting higher, not the best, most organized call I’ve listened to but ok, sounds like more news in the next 2 weeks.
Looking at GOM lease sale bids by company by block info. Chevron, who has been notably absent from the GOM shelf(shelf = less than 200m water depth)for the last few years bids on 60 blocks total. A whopping 32 of those are on the shelf and are concentrated in the Sabine Pass, West Cameron, East Cameron, & Vermilion areas. These areas are offshore western Louisiana over to the TX state line.
28 bids by Chevron in deep water. Petrobras, who couldn’t get enough deep water blocks 2 yrs ago, bids on 1. They must have all they want now.
HAL trying yet again to break out of this year’s trading range. Just short of the 32.39 peak in early March and above the mid Feb run to $32.15. I’m not a chart guy but I can hold my own.
Jy – yeah, weird to see a Major plodding back onto the shelf. All I can think is that they have reprocessed 3D and are looking at the ultradeep, below the salt weld.
nfx determined to go red
For the ARD watchers, there is a definite bowl shaping, at least on MACD.
Re #23. Z,I suspect the same as you especially as the blocks are concentrated in the western part of offshore LA and they are bid in 2-3 block groups.
Thanks dij – watching.
JY – They have to be hard headed about and go drill their own $150 mm exploratory tests. I could save them a lot of trouble, just given MMR a 33% premium to their TEV (about $2 billion total) and you have 12 prospects and 2 discoveries with first production in less than a year. Sheesh, is that so hard?
13 thats strange isnt it?
HAL finally took out that $32.40 level which has been a bugger twice, resistance looks $34ish. Moving averages are below us. Fundamentally, N. America may be softer second half depending on gas but all indications are they get a strong first half, and that international ops are still picking up.
LS Webcast starting now:
http://www.oosa.com/
I’m just listening to the bids on the first page, until they get down to South Marsh Island.
Morning all. Vix opens at 16.66 (those 6 numbers again!).
Dow finally catches up with the other indices and makes a new high for the year.
I personally think this rally is crazy and that there is a ton of risk out there but nobody seems to care.
We would need to take out 1134 to the downside to give us a sign that the shorter term cycles are rolling over.
25- ard never recovered from the 10 hit it took on earnings
Analysttarget is 50 with 80 dollar oil and 39 with 70 dollar oil.
Last time i looked oil was over 80.
I think the next catalyst for them is next qtrs earnings which will be double last years numbers
re 28 – they’ve got the area pretty leased up. I guess they didn’t want the blocks that were open nearby, could be thought to speak to it not being much outside the original blocks.
Energy stocks giving ground with oil #s 25 minutes from now.
Oil’s sell off appears to have been a wonder day wonder and i think we have retraced too much of the fall to think we will take out Monday’s lows again.
CVX throwing some money at those Shelf bids, bigger by far than the independents. Nothing says you like a patch of water like $7 mm. It’s small compared to the old days though.
In Vermillion area MMR is going head to head with CVX, lost both times but picked up offset blocks. CVX definitely looking at ultradeep given what they are paying.
Bill – MCF just paid $3 mm for VR 170. Just passing along, don’t know what he’s after there.
Ok, done listening to the SMI part of the lease sale. MMR spent about 3.2 mm on 5 blocks in the Lafitte area, so gearing up for their exploratory well in the area either this year or next, not sure what timing is.
FWIW the voodoo looks weaker later today and most certainly tomorrow looks like a down day. However we may only see a retracement back to 1150 now before heading higher.
Nicky – you’ll be happy to know the Fast Money guys were calling tomorrow definitely up, lol.
EIA Oil Inventory Report
Crude before report, up 80 cents at 82.50
Inventories:
Crude up 1mm barrels
Gasoline down 1.7 mm – good
Distillates down 1.5 mm
Demand
Gasoline: 8.849 mm bpd, shy of last week but still strongish for this time of year compared to trend.
Distillates: 3.762 mm bpd, up from last week, better trend of late.
….
more EIA …
imports off slightly from the prior week which had retreated from a recent surge.
Cushing inventories fell back which is supportive.
Oil looking pretty directionless. The gasoline number was much better than expected which is what you want to see to support crude as we head into Spring.
mcf bid on a couple parcels at 3.0 m +. I guess if they want something they go for it. Most bids are between 250 and 1.0 m
Z re # 40 – why were they calling tomorrow up? they don’t normally call it more than a few hours ahead.
EVEP conf. call on acq. environment: CHK and XTO were most aggressive acquirers driving up acq. prices. Good news: they shale focused so fewer bidders. Bad news: they have been replaced by private equity and hedge funds who are “extremely aggressive” on price and don’t know what they are doing (but we can buy those assets in 2 yrs. at a discount).
Nicky – good point/question/lol. All they said was something like “It’s quad witch baby on Friday!!!”
RMD – I didn’t have a chance tp look over the pr; what was wrong with the quarter, given that the MLP is off 6%?
Yes well tomorrow is Thursday. Friday looks weak but not as weak as tomorrow.
Nicky, between the lot of them, I don’t think they are sporting a full pack of chromosomes.
Well they change their tune on a dime that is for sure. I heard Joe T say he expected a huge move up in oil today.
I did too but I heard no basis for the claim. Crude is high for what’s going on and should trend sideways until western hemisphere demand picks up more.
RMD: RE EVEP inst holdings — according to Barclays the inst have 13.8% of the float and individuals have 86.2% of the float.
RMD: re 52 — sorry I missed read your post on 45 — it hand nothing to do with the inst interest in EVEP.
oily stocks are either giving up gains or falling on their face..tough market
Yep, not acting well since before oil inventories, looking for a better afternoon with some exits in mind.
53: I do that all the time.
Z: rev. shortfall, but I haven’t looked up what the St. expectation was. Will update later.
RMD – thanks, at least they had revenues, or financials for that matter. TAT coming off because they did not report numbers with their year end.
Nicky – where do you put support and resistance now? Thx.
Z – what we have is the most dangerous pattern in the markets – extending extensions. Almost nobody wins. They are impossible to short and it is said that if you buy into one 99% lose what they invested. Extensions end with a sharp up thrust like we saw this morning on the open then drop faster than the up thrust. Therefore this morning does not look like an end of the extension.
There are signs of negative divergence and I think we are close. Its only my opinion but I don’t expect us to see 1200 on the SPX before we see a correction. We are completing wave iii to the upside (relentless in either direction!) and now need a iv wave pullback before a final v higher and then a bigger pullback.
We are into the resistance areas I have been giving this week. 1163 – 66. Then 1171. Then 1178. I will be very surprised if we don’t top out between here and 1178. If it doesn’t then we have something much more bullish going on wave wise.
Z: what your taken on Credit Suisse going kind of neg on deepwater drillers. In the report they say that deepwater supply is finally catching up with demand. That there is demand saturation and that Petrobas won’t bail out deepwaters this time. They are up beat on the service firms like HAL and SLB.
BSJ – I have not yet read that one. Are they thinking the pause in rates continues or something more important like failure to absorb newbuilds leading to lower utilization.
RMD – re EVEP – they give distribution coverage?
For people interested in reading the report go to google then type in big dog boom boom — click on big dog boom boom message room and go to msg 129352
RE: 61 more important — the failure to absorb newbuilds is the problem.
Job’s bill passed senate earlier today:
http://news.yahoo.com/s/ap/20100317/ap_on_bi_ge/us_congress_jobs_bill
Drop in the bucket.
Lease sale just ended, final sale stats in about 30 minutes. Went back through time to see behavior of MMR relative to lease sale and it does not appear they are big updates as soon as the sales are over but sometime within a week to a month or so of the sales. They are, as E&Ps go, pretty active in terms of operational updates. It’ll be two months since their last ops update on the 20th of March but there was the 4Q call in between there as well. So fingers crossed but not holding breath.
BSJ – ok thanks. I’ve seen others going the other way on that of course pointing to PBR as the savior of the deep. Tom can speak more to that than I.
RE 65: I don’t know the aggreate suppliers (VMC and MLM) — which I have stakes in, liked it. Both are up today a nice amount today.
VMC – makes roadbed aggregate, right? There was $20 billion in highway and transit programs.
RE: 69 — Yes, VMC supplies the aggreates (rock, stone) plus asphalt that goes into contruction. MLM does the same but does not supply any of the asphalt. Both companies own the quarries where the stone is taken from.
EVEP didn’t specifically talk about coverage. $3.02 current = $82mm/yr. “09 DCF was 75.5mm; production guided up 16% to midpt. of guidance.
BSJ 60. If you were able to read the CSFB report, you know that DO sacrificed price for term. That is not the case with all offshore guys. DO always pays more and is majority owned by LTR (Tischs). They only want the income they don’t care as much about increasing market value. Because utilization and rates haven’t been big time strong, they see onshore rigs rising and think HAL and SLB have less risk. I can forward report thru Z if you would like.
RE: 72 — thanks Tom, but I have already look through the report, but thanks anyway.
I menetioned report only to get Z take on it. I figure he is lounging around, might as well make him do something — lol lol lol!
Thanks RMD. Watching the WHX breakout here on stronger oil. Coming out the top of the range now, yield still 13.5%.
71 multiplying % production increase by ’09 DCF would simplistically give 1.08X coverage in ’10.
RE: ENP — Z yesterday I menetioned ENP — today I noticed GEL, another MLP that DNR has an interest in, is doing a secondary. DNR is one of the selling shareholders. This was expected because DNR had already said they where going to do this.
Question now is, since DNR is now on the path to develeverage, will it plan some drop downs into ENP? If they do, then ENP will also have to sell shares to fund this drop down. Anyone interested in ENP might want to wait for that event.
RE: 76 — ENP is now yielding almost 11% and is watching up with WHX in yield. I know I am comparing a trust with a mlp which is NOT and apples to apples comparison.
Nicky – thanks for 59.
ZTRADE – ZLT – WHX
Added WHX for $18.75 with a 13.6% yield at present. Easy enough to model and I had a need for yield. This is the first of two or three purchases here as I average in over the next couple of months.
ICO moving nicely today…in sync with MEE?
BSJ – the interesting part about the GEL secondary is that (as far as I can tell from the PR) it really isn’t a secondary – it’s DNR’s GEL units that are being sold, no increase in the float.
I’m waiting for an ENP secondary that should come soon. I hope to buy at $18.50.
Kaman – yeah, with the MEE deal. I just think they’ve all run pretty hard here and I missed this last leg and so I’m sitting out.
is there a link on the >final sale stats by block/name
z – can you post a sentence or 2 about WHX’s hedges?
re 83, later today.
looks like contango went up against chevron in 2 blocks off ship shoal. I think thats the area where mcf just had a successful well (Nautilus)
WHX Hedge:
Oil: floors in the mid $70s for probably 60% of expected oil production for 2010
Gas: floors ranging from 7 in the heating season to 6 in the summer on north of 50% of their gas production.
Company is about 60% oily as of the last distribution.
RMD – know you are out of AEZ – that’s looking higher as they approach actual news.
…from Bakken wells 1 and 2.
BEXP acting like I dunno. Very odd. The CLR news yesterday pertaining to the Three Forks working on the edge of Rough Rider seems to have been completely ignored. Stock in the hole today versus the market and group after having not been lifted by a strong press release yesterday. Hmmm.
Pickens rant on oil imports in the month of February. Nothing new here but if you haven’t heard it it’s a pretty common sense stuff. Argues for natural gas.
http://media.pickensplan.com/websitedata/PICKENS_FEBRUARY_30.mp3
andarko wins the prize
The highest bid received on a tract was $ 52,560,000 submitted by Anadarko E & P
Company LP and Mariner Energy, Inc. for Walker Ridge, Block 793.
That’s near their Lucas discovery, way out in the middle of the Gulf. Guess they liked it.
typo, meant Lucius
ank of America Merrill Lynch analysts cut their 2010 U.S. gas price forecast to an average of $5/MMBtu from $6 on the expectation of rising production from shale plays, which might only be thwarted by even lower prices still, they said.
“Unless even lower prices force producers to slow down horizontal drilling, natural gas production could soon recover to last year’s levels. On top of that, rising LNG [liquefied natural gas] imports and a sluggish demand recovery could also weaken the balance this summer,” the analysts said in their latest weekly note.
Even as prices founder, horizontal drilling continues in shale plays such as the Haynesville, Marcellus and Eagle Ford, the analysts noted. “…[T]he horizontal rig count started expanding gradually and has recently jumped to a new record high of 700 from a low of around 370 last June. Given that drilling still declined elsewhere, horizontal rigs now make up 50% of the total rigs in the United States. This development suggests that the industry can now operate financially at lower prices.”
Citing research by the bank’s equities group, the analysts said the marginal cost of production for U.S. gas is set by vertical wells and is $6/MMBtu, assuming a 10% internal rate of return. This figure is the basis for the analysts’ gas price forecast.
“Break-even costs in the major shale plays can be substantially lower, ranging from $1.50/MMBtu to $3/MMBtu in the Marcellus Shale to less than $4/MMBtu in the Haynesville, suggesting that producers in these areas can make money at current prices,” the analysts said. “…[W]e expect the marginal cost curve to shift to the right as shale gas production expands, putting downward pressure on marginal costs.”
They also noted productivity gains in gas shale plays. Initial production rates in the Haynesville have averaged 15 MMcf/d, compared with those in the Barnett Shale of 2.4 MMcf/d. On the strength of the shales, the analysts are expecting “a relatively shallow decline” in production this year of 0.52 Bcf/d.
Domestic production that refuses to slow down is one factor contributing to the oversupplied market; LNG could be an even bigger risk to the bullish case, the analysts said. About 3.5 Bcf/d of global LNG liquefaction is slated to come on line this year, they noted.
“U.S. natural gas futures contracts are trading above the equivalent UK contract through September, likely attracting LNG flows to U.S. shores,” they said. “Moreover, [Russia’s] Gazprom just announced it would start to peg some European gas export volumes to spot gas prices instead of oil indexation
ZTRADE – ZCAT – WLL
WLL – Sold the 20 March $80 calls for $1.30, up 35%.
WLL – continue to own the common but felt I was pushing my luck this close to expiry.
94 Lucious
CITIBANK:
Lucius Appraisal Continues Gulf of Mexico Success
Lucius Appraisal Expands Oil Potential – Following up on the deepwater Gulf of Mexico Lucius discovery (APC operator, 50% WI) in Keathley Canyon announced in early December, Anadarko today announced a successful updip appraisal that encountered over 600 net feet of primarily oil pay with very high permeability and porosity. This is triple the 200 net feet of primarily natural gas pay found in the
discovery well and Lucius is now likely to be APC’s largest ever GoM discovery.
Upside Potential Equates to ~10% of Anadarko’s Total Proven Base – Today’s
results increase the oil potential from the generic 100 MMBOE target size to the
250-500 MMBOE range. Net, 250 MMBOE equates to more than 10% of Anadarko’s total year-end 2008 proven reserve base.
Stand-Alone Development Now Most Likely Option – The potential size of this discovery makes a stand-alone development more likely with first production as early as 2014. The quicker option to utilize the nearby Red Hawk spar (two years) would likely be insufficient relative to potential production volumes.
Rig Plans – the Ensco 8500 semi-submersible ultra-deepwater rig will now move to drill the Heidelberg appraisal well (APC operator, 44.25% WI), and then likely return to Lucius for further appraisal drilling.
2010 Slate – Anadarko reports Q4 results on Monday along with 2009 reserves and has scheduled an analyst day in New York on March 2nd. Next on the drilling slate should be results at the Shell-operated Vito appraisal (APC 20% WI), and Windjammer (APC 42%) offshore Mozambique.
Reiterate Buy/High Risk Rating – With a 12-month target price of $80/share.
Volume continues to be very weak.
pxp has 1/3rd of lucious and its wallowing lower than where it was pre davy jones
The Dow has some serious resistance at 10800.
HK actually moving, threatening to reawaken my $22s if not my $25s.
HAL calls on the chopping block soon.
ZTRADE – ZCAT – HAL
HAL – Sold the (30) HAL March $32 calls for $0.87, up 3%, with the stock up strongly today. Will roll forward here soonish.
OII – running up into a busy hurricane season, go figure. I missed that one this year but may chase a bit in a small way.
KOG, doubled down on break of 3. Thnaks for the charts JB !
Anyone have any thoughts on the markets reaction if they pass the health care reform bill this weekend?
Nicky – sorry, haven’t found the time to read it, lol.
looks like a chance to break thru the 3.09 recent high in KOG today, to me….hope so
Watching MMR drift back up and EXXI clean up from this morning. BEXP … still don’t get that move. Otherwise not a lot left of the March positions in terms of value after punting WLL and HAL.
Speaking of KOG … AEZ and NOG on the march again as well. ROSE too.
Shame on you Z – its only 22 thousand pages or something!
I am almost thinking its a sell event either way. If it fails it weakens Obama considerably. If it passes people are going to say the US can’t possibly afford it.
Hey BOP, Intern #1 thanks for you pushing me to pay attention on KOG, up 136% for her to date … Which is good because she will need a good college education to get a good job to pay for her share of all this spending going on.
If the “heathcare bill” fails, I would buy the market out of shear joy at finding out the American People are not SHEEPLE.
And that we are capable of avoiding self destruction.
I am all for health insurance reform, medical cost containment, and access for people with pre-conditions. But this is NOT the bill to accomplish that.
So, I think the market would rally.
z — #111 too cute. thanks!
Did Intern #2 buy BEXP? Or did he prefer ROSE? Missed the train on both of those. Those were great picks.
BOP – just checked my sister’s account, got her in earlier, up 196%. She’s happy too.
BOP – Intern #2 is long forest products and the occasional banana, but no hydrocarbons as of yet.
Stupid Way To Handle IR Watch:
Come out with your pr after the open on Wednesday and hold a conference call on Friday. That’s just dumb. Case in point: CXPO, which continues to fall towards my sub $3 buy in point. Will read and circle back with anything particularly enlightening.
wow. Even water-logged and bedraggled PXP is in the green today.
Oh cool. MMR scooting…
PXP – Yeah, barely. Probably the big bid APC made for a block adjacent to Lucius.
Sorry. Not a lot of value-add today. Spent all morning with the auditors. That’ll suck the oxygen right outta the room on ya!
Oil running up into the close of NYMEX, now up $1.20.
Seriously considering adding BEXP calls for a wildz. Somebody wake that stock up.
Lucius is HUGE. Don’t think they spilled all the beans on that one yet as thought they would pick up more acreage. Guess they did.
So, MMR and Friends did not bid on any more DJ-adjacent acreage? But added to Lafite??
BOP – yeah, that pretty much sums it up. There is one sort of nearby block but I’d bet that’s not related to DJ … or DJ is much bigger running to the east than I thought.
hmmm…. wonder how that fits into my Evil Plan for MMR to put out a DJ et al. update PR tonight or tomorrow. Will go nose around a bit…
ZTRADES – ZCAT
BEXP – Added (10) APRIL $17.50 calls for $0.85.
WILDZTRADE – very, very high risk trade.
Added (60) BEXP MARCH $17.50 calls for $0.15 with the stock at $17.08 and not responding to news yesterday, see comments in post.
re 126 … I’m probably bordering on violating my own “Don’t trade angry” rule with that one.
Well, the met coal stocks are in the spirit of the holiday today, thanks to GS met coal price forecast.
BOP – In my mind it takes it down slightly but by no means rules it out. Their history shows they are a frequent operations press releaser and the timing is good for one. I just don’t see that the lease sale was really holding them up but maybe they didn’t want to talk up DJ more in front of grabbing those Lafitte leases.
Skimo – and MEE bought private met producer Cumberland Resources last night.
MMR on the tape with 17 high bids …
… nothing in there regarding operations, just the lease blocks and the corresponding prospect names that go with them.
“Blood & Guts” = an MMR ultra-deep prospect name. Think they are going just a little hog wild with this pirate stuff???
and here I thoguht Blood and Guts was my hero G.S. Patton
I voted for this site:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
BOP – if 44 out of 172 Detroit schools are closing, what are they doing with the kids, doubling up in the remaining schools? Seems like someone should organize the umemployed and pay them a low wage to be teachers assistants or specialty assistants. Much better in my view than spending another $20 billion on CCC type projects for a workforce that is mostly service oriented. Maybe I’m just off on a rant but it seems that the last thing you do before the lights go out is kill the schools.
z — you are completely off-base here. Detroit has LOST about 1/2 it’s population since those schools were built. They only kept them open to keep the “staff” happy. It was never about the kids… only the teacher’s union.
the detail is out on mms site
pxp bid about 100 m on a number of leases
Ok, that makes, forgot you guys are permanently bent. What about the schools in Kansas?
The outsider they brought in to oversee the Detroit School restructuring (Roert Bobb) is just about the best thing that has happened to that school system in the last 40 years. He is ALL about the kids. And that is making the pols and the teacher’s union very very mad.
He is the closest thing I’ve seen lately to a true Living Saint. I just pray for his continued safety.
sorry… Robert Bobb.
I still like my “arm the unemployed with books” plan and may take it on the road, lol.
I see it Bill. Would rather see PXP delever.
Nicky-#110 If healthcare bill is passed then we could see the dollar drop gold up and oil follow,that could be another effect which should negate the fall in the market
anyone else see this re: preparation to possibly attack Iran?
http://www.heraldscotland.com/news/world-news/final-destination-iran-1.1013151
Hearing we may have to wait until monday morning to get the latest update on Davy from MMR. MMR is presenting at HW that day and has promised to show a video on DJ that will “knock your socks off.” HW is not webcast, so think they would have to put out a PR before that.
Thanks much BOP.
Market lost its steam when Kucinich agreed to back the HC Bill.
144 It’s much more likely that Obama will find a way to convince himself that the US never should have gotten involved in the first place, congratulate Iran on becoming a member of the nuke club then throw his hands up in the air blaming Bush for not seeing how a nuclear Iran will benefit the world in the long run.
Greenbeerthirty
Anyone have any recommendations for software for stks and option accounting-downloads from brokerages-Quicken 2010 is getting horrible reviews and Gainskeeper and TD’s 1099 do not agree when options are exercised-a lot of manual corrections are not my favorite activity.
Anything out after the bell on AXAS?
Another reason to take a wait and see with ENP — DNR got rid of all the EAC exectives that where running ENP and put in DNR exectives. This is hardly news because DNR have hinted that they where going to do this. However, since ENP was sort of Brumley’s “baby”, we will have to see how DNR will treat ENP. This just might be noise and means nothing. The first drop down will tell alot.
Good evening…
West #105…you bet, glad it was a help…
Zman, #135, thank you…
Added RRC with charts and commentary…
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
Voted JB, as always, the charts are great, thank you!
Kaman – AXAS got their numbers out the door after the close.
Choices – not sure of a non-brokerage products for that. My accountant years ago told me to put it in a spreadsheet. It’s rude to laugh in your accountant’s face but I did. Your brokerage firm should offer a solution for this. Sometimes it is a report you have to request.
Re: #154, john, thanks much…
JB – thanks for the 4 charts on BEXP – anything to add given today and yesterday’s action? Looks just like a little profit taking from that high, staying in the range but the timing was odd.
RE# 157 BEXP…good evening Zman…I’ve updated BEXP daily and the BEXP #2 with additional comments and perspectives…I agree, it’s odd, but from a technical perspective BEXP still looks good…
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
Thanks much JB.
Nicky, you are not alone in thinking this rally is completely crazy !
jivey, 144 … that’s been making the rounds …. Obama attacking Iran ? I don’t think so. He can’t even get them to return his phone calls and letters.
He won’t even let our troops in Haiti on humanitarian mission raise the American Flag.
He wouldn’t go take a pee w/out Ban Ki Moon and Vlad and China (Wen?) giving him the okey dokey.