Friday Bullets

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Last day of vacation....

  • Yesterday = not pretty in energy land. Last 3 weeks = pretty much the same, under-performance during the melt up. Reasons for this separation a bit of a head scratcher but a combination of exhaustion, spring time doldrums for energy demand, post 4Q news/catalyst lull, continued weak natural gas prices, plus a shift in expectations for NAM activity levels expected in the second half.  I can't count the number of times the Howard Weil conference has yielded new data / stories and the group has done the opposite of what you'd think. 
    • The AMEX natural gas index and the service names are now negative on the year despite a 5% up move in the S&P. Makes sense that gas is to blame for both.
    • Gas will likely firm as we approach tax day or thereabouts. I don't expect to see $5+ until we see smaller than expected injections and that will take heat.
    • TAT moved to a new recent high despite the group action. Positive HW comments + smaller names outperforming.
    • ARD - still watching, the base has become looser while the volume has tailed off less than expected so the direction of the snap may be lower first, then higher later. I'm becoming more interest as time passes and the chart erodes.


  • Natural Gas Storage: Up 11 Bcf was in line with expectations. Whether we get a V or a U-shaped recovery in storage levels will determine the Spring time appetite for gas prices. I'll have some new graphs in the gas inventories section next week.


  • Eco data today:
    • 4Q GDP revised to 5.6% vs prior 5.9% 
    • Consumer sentiment later today.

Other Stuff:

  • People are shopping, at least at discount malls in the deep south. Wow, the lines. Unscientific comment of course but I was nevertheless shocked by two things: by the number of people there (lots nearly full mid day and the same can be said of many of the hotels I passed) and by the fact that I was even at mall on vacation.
  • Lot of residential property for sale, but I did not see one sold sign.
  • In response to Nicky's real estate comments I'd add that two of my commercial real estate friends say the markets in Dallas and Miami remain completely dead.
  • Eglin Air Force Base A-10 flew for an hour entirely on Camolina plant sourced biodiesel with the pilot commenting that it was a normal flight, could not tell the difference from JP8. Camolina is turning into a viable option for low cost diesel.  Looking for the ag play on this one.
  • From Russia With Not So Much Love



104 Responses to “Friday Bullets”

  1. 1
    BirdsofpreyRcool Says:

    TechTrader AND HeadTrader out today. Wonder if that is meaningful. Frankly, I think they are just BORED to death. Lack of market volatility has been putting those guys to sleep lately.

    Futures are up. Dollar is weaker. So commodities up a bit.

    Nat Gas not looking so good. Would love to hear Aubrey do more than just lay down 20 rigs. Barnett and Fayettville just not attractive at current nat gas prices. And… it gets worse. Producers have been able to take advantage of the contango in nat gas, selling forward. That advantage is going away. Until we see some serious curtailment in production, could be $4 nat gas for the foreseeable future. No one is happy with that.

  2. 2
    BirdsofpreyRcool Says:

    OK… oil futures gave back the green. Pretty much unch’d right now.

  3. 3
    rseidman Says:

    It seems that TT and HT are not the only ones out today. BOP: Are we the only ones on this site this AM?

  4. 4
    BirdsofpreyRcool Says:





    yes, rseidman… i think it’s just you and me, Bud! But thanks for making it fun. “Party of One” just doesn’t cut it.

    The HW comment that “people are bored” with the sector… said a lot. But things have a way of sneaking up on you, when you turn your back on them. So, cruisin’ thru the underbrush right now… looking for prey. Bored? NEVER.

  5. 5
    elduque Says:

    Good morning one and all. NG not doing anything. HK trading cheap. Portfolio has really gotten beat up with sell of energy stocks and up market in financials or anything else. I guess the gold stocks have come off.

  6. 6
    BirdsofpreyRcool Says:

    interesting… just found out that if you put words in between 2 <'s… they disapear.

    It was a lot funnier (to me, anyway) when the word "echo" appeared between the <'s

  7. 7
    BirdsofpreyRcool Says:

    Officially a party now… elduque is here. Thanks! 🙂

  8. 8
    BirdsofpreyRcool Says:

    Just need CHK to talk about shutting in production and the energy kids could snap back quite violently. Especially the heavily-shorted ones (MMR, GDP). But, it’s still a wash-and-rinse market… have to buy low and sell high. With an eye on the US dollar and treasury markets, of course.

  9. 9
    Jason Says:

    The usual lurkers are still around. Nice move in FSLR today.

  10. 10
    BirdsofpreyRcool Says:

    “Everyone agrees” that nat gas is going to stay at $4 ’til the cows come home… and then some. Maybe so. But once everyone is in agreement, funny things can happen, over in the dark corners of the room.

    Never comfortable with “everyone thinks so,” it’s rarely that straightforward.

  11. 11
    tomdavis12 Says:

    BOP: EXXI should rally today, sold small because I manage not to lose. This is when I make biggest mistakes. Catalyst for any of the Triads that you are aware of? 😉

  12. 12
    BirdsofpreyRcool Says:

    Jason — thanks! So, CEO of FSLR pretty much sold at the near-term bottom, eh? What’s driving the move off $100?

  13. 13
    1520sbroad Says:

    Anyone been to the Developing Unconventional Gas conference in Fort Worth? It’s at the end of March. Any color vs. other conferences?

  14. 14
    ratberto Says:

    “At Dallas energy conference, natural gas executives upbeat about long-term future”

    Read more: http://www.star-telegram.com/2010/03/25/2068071/at-dallas-energy-conference-natural.html#ixzz0jICW7Ocl

  15. 15
    BirdsofpreyRcool Says:

    tomdavis — i think consensus says there are no significant catalysts for The Triad until next Fall. EXXI CEO pretty vocal that there WILL be a production test before October and they will be selling hydrocarbon molecules from DJ in 2011. But, there is a lot of skepticism and rumors out there. So, it’s been an easy well to short (with MMR the biggest loser there).

    Puzzled at the lack of an operational update. The DJ#1 rig should be moving to the DJ#2 site (2.5 mi away) in a week or so now. But it’s curious that MMR has been so light on PRs. Seemed like they were cranking out 1 a week or so. The silence is deafening. There must be a reason. Could be either good or bad news, time will tell.

    I like EXXI for it’s oily production. Everyone else seems to be jumping on the bandwagon with the statement “we are going to get oilier.” Well, EXXI is already there. Unless oil is headed back to a 6-handle, I’m comfortable holding through the volatility in EXXI. Hurricane season is the main worry for me there, but it won’t crash the company, like it could have 2 yrs ago.

    MMR… it’s 75% nat gas production and falling in 2010. Don’t like that. Neither do others, it seems.

  16. 16
    tomdavis12 Says:

    BOP: Thanks. Love your updates.

  17. 17
    Jason Says:

    Re 12: I saw some upgrades this morning. I also saw an article last week talking about GE getting into the thin film biz. That gorilla in the room could explain some of the FSLR weakness lately.

  18. 18
    BirdsofpreyRcool Says:

    Jason — GE moves into a lot of markets via acqtn (vs build from scratch). Any chance they might find FSLR attractive?

  19. 19
    elijahwc Says:

    TRGL: Yesterday just before the close TRGL fell into the well and didn’t manage to catch any rope on the way down. Won 6th place for NASDAQ %decliners. Funny how these types of things get circulated in the final hour. Released this am:

    “C.K. Cooper & Co.: Lowering Price Target TRGL: [WSS] – 03-26 8:50 AM
    [Contact: Kamala Connors – 949-977-2082] Review of the 2009-10K shows that our valuation for proved and probable reserves in our NAV is too high. While TRGL reported an increase in reserve volumes at 12/31/09 from the prior year from 4.9 MMBO to 5.8 MMBO, the after-tax PV-10 value at the end of 2009 was nearly $2MM less than at the end of 2008, despite using a reference oil price for the valuation that was almost $23/Bbl higher. It appears that Gafney, Cline & Associates used more
    conservative methods to evaluate TRGL’s proved reserves at yearend 2009 than LaRouche Petroleum Consultants did when they evaluated TRGL’s French Reserves in 2008. We believe the aggressive accounting practices were conducted under the previous management team. The new management team was appointed at the end of March 2009, after TRGL reported 2008 year-end reserve numbers and filed its 2008-10K, and they provided greater transparency by selecting a more conservative engineer to evaluate reserves at 12/31/09.

    •••• As a result of the new reserve disclosure, we have reduced our
    NAV/Share from $12.62 to $9.48 for our $70/Bbl oil flat perpetual case price deck scenario.

    •••• We maintain our BUY on TRGL, but lower our price target from $12.50 to $9.50 to reflect the lower NAV. The weaker valuation pertains to the firm’s conventional proved and probable reserves
    and do not impact our view that potential development of the
    Paris Basin Shale oil may hold significant upside for TRGL.
    Therefore, our risked valuation of $5.18/Share for the Shale oil
    potential remains unchanged. Over the last year, the new management team has made significant progress in restructuring the company’s asset base and balance sheet and appears to have
    made an effort for greater accounting transparency. Just a few weeks ago, management indicated on its year-end conference call that it was on track with its goal of signing a definitive agreement with an industry partner by mid-2010 to jointly test and
    potentially develop the Paris Basin shale oil. We believe that an
    announcement of an industry partner would be a significant catalyst that could move the share price to our goal price or higher, depending on the terms.”

    I seem to recall some wise person on this site suggesting that to own this name would require a bottle of TUMs on the desk. I am now in the medicine cabinet search for Prevacid and Nexium.

  20. 20
    Nicky Says:

    Good morning all. I will join the party!

    So either yesterday was all of a wave iv correction and we are on our back to new highs which I am not so convinced about or we are just correctively retracing yesterdays falls. Interestingly a 62% retracement on the spx would get us to 1176 and set up a nice head and shoulders with a target just below 1155. Its just one idea and probably won’t play out!

  21. 21
    elijahwc Says:

    KWK – Capex reduction update from Southcoast.

    Capital One Southcoast: KWK Follow-Up from Meeting with Management

    Barnett update: CAPEX cut to 3 rigs from 4 seems likely. Management is discussing the possibility of dropping to 3 rigs from 4 in the Barnett. This is in addition to the drop from 5 rigs to 4 announced one month ago. Rather than drilling 100 wells and completing 130
    wells, KWK would likely drill ~85 wells and complete ~100 wells, which would reduce CAPEX from $540MM to ~$475MM and reduce our NAV by ~$0.50. This would lower 2010 production growth ~5% with another 5% in 2011. We are lowering our production growth estimate from 22% to 18% for 2010 (versus 20% guidance) and from 21% to 16% for 2011.

    Horn River update: This area is becoming more and more interesting as other operators announce positive results near KWK’s acreage. As mentioned in our KWK write-up last week, if we assume 17.5 Bcf wells for $11MM and 320-acre spacing (based on ECA’s assumptions for the play) that could increase our valuation from $8 to $11 per share (at $6.50 long-term gas). This area is very sensitive
    to commodity prices and barely makes money at $5 gas with a 20% rate of return at $6 gas. This area needs $6+ long-term gas to add much value. KWK has announced 2 wells and has drilled two more wells that are not yet on production. KWK plans to test the Bakken Oil horizon this summer August/September), which should be the first test of that horizon in the area (no value in our target for that horizon).

    Alberta Bakken update: KWK owns 130K net acres here that could be worth ~$3 per share on success (640-acre spacing, 250
    Mboe/well, $12/bbl value). We are giving it no value in our target price. KWK plans to watch other operators in the play this year and may drill a well in 2011.

    NAV summary: KWK is one of the most levered companies in our universe (over $10 per share in debt). We have a $15 NAV at $6.50 gas, but less than $10 at $6 gas. Our take: KWK is a high beta gas name. Like almost all of the companies we met with this week, it is discussing CAPEX cuts due to the current commodity price environment. KWK will be a great stock to own when the gas markets recover, but due to near-term weakness
    on gas, we would not be buying the name here.

  22. 22
    Nicky Says:

    We also have backtested the downtrend line which we broke yesterday which is quite normal. There is a cycle low due Tuesday/Wednesday of next week. I think if Monday is down that could actually be it for this downdraft and we see end of quarter window dressing for our wave v up.

    In the meantime I think we have all done a great job keeping this going whilst Z is away – a really good number of posts each day considering BUT if he could just drag himself away from those bikinis (!!!)we would love to see him back.

  23. 23
    Nicky Says:

    Interesting article on the technical ‘death cross’ in European markets:


    Chinese market made its death cross on Monday. Greenspan was on Bloomberg earlier saying he thought China was a bubble waiting to burst.

  24. 24
    Jason Says:

    Re 18 – BOP, it looks like they’re growing with tech from another company called PrimeStar Solar.

  25. 25
    elijahwc Says:

    Jason / FSLR

    Ran across this trade from another venue from an options trader who has been hot dot recently. FYI

    “One thing I would not want to be is short First Solar (FSLR) right here. This chart looks dangerous to me. It is flirting with a very real breakout that I believe would push the stock to $125 quickly. If I were going long, I’d consider a skip-strike butterfly here, buying the April 115 call, shorting 2x April 125 calls, long 1x April 130 calls around 3.20. If the stock goes to $125, then you have the chance to triple the value. If it runs to $130, then the worst result should be a sale of $5 against a $3.20 purchase. The current cost of the April 115 call is $5.70, so you are risking about 44% less capital. We’ll call it 40% to account for commissions.”

  26. 26
    elijahwc Says:

    Reports from multiple sources are saying that a South Korean Naval ship has been sunk with many casualities. A torpedo attack suspected and apparently they situation is esclating.

    Two questions: Has anybody heard the same and why are the CNBC talking heads and markets not paying attention?

  27. 27
    elduque Says:

    BDI keeps falling.

  28. 28
    BirdsofpreyRcool Says:


  29. 29
    elijahwc Says:

    Wow thanks BOP and mark me down as confused. How can this be so unimportant?

  30. 30
    Gmlgdc Says:

    BOP a comment about MMR and EXXI DJ. Did a little research and FMC Tech already builds a 20K subsea wellhead. So the rumors regarding never getting to sales is a sham….

  31. 31
    BirdsofpreyRcool Says:

    Gmlgdc — THANK YOU!! Totally agree. SHAM. But a hideously successful one. Apparently, even the Slobs at SLB are saying it’s not techinically possible. What the heck? Schiller saying to look at MCF’s two deep nat gas wells (forget the names right now, girl’s names….). He says that DJ will be completed just like those wells. With pretty much “off the shelf” components.

  32. 32
    Gmlgdc Says:

    Well if your idea of drilling a well and not being able to produce it is your business model – you’ve got some real problems. Especially if you’re drilling an offset – geezzzz?

  33. 33
    Gmlgdc Says:

    Correct me if I’m wrong, these wells cost $170 million?

  34. 34
    BirdsofpreyRcool Says:

    hellllll-OOOOOOOOOO. You just hit the nail on the head, Gmlgdc.

    “Gee… drilled a well for $120mm that I will never be able to produce. Let’s move the rig over and drill another one for $150mm that I can’t produce either.”

    Joke’s on me, tho. People actually believing all that cr@p.

  35. 35
    RMD Says:

    So far running the traps for comments about MMR’s presentation at HW has produced only “what could they say? We weren’t expecting anything.”

  36. 36
    BirdsofpreyRcool Says:

    Drilled and completed estimated cost at $150-175mm/well. WithOUT the additional $300mm for a processing plant and infrastructure.

  37. 37
    Gmlgdc Says:

    WOW, real savy investors huh!

  38. 38
    BirdsofpreyRcool Says:

    I have a very close friend at a mutual fund in the Boston area who is the energy analyst. Until last week, she thought oil came from drilling wells into large buried caves, sticking a straw down and sucking.

    Now, there are some wicked-smart energy buy-siders out there. But just because you’re an energy investor doesn’t mean you have any idea what you are doing. Hence, the success of the Rumor Mill.

    However, the gassy and declining production nature of MMR’s 2010 profile is not something that makes me very happy. There are easier battles out there. I think the shorts are winning this one. (I know they are.)

  39. 39
    Gmlgdc Says:

    I have an oil shale idea bouncing around in my head and was thinking about GDP – but wait they can’t find oil at a gas station. With Chesapeake laying down rigs and curtailing production it’s going to be a rough road for GDP.

  40. 40
    ilikericky Says:

    RE #33 My thinking on this is that people are really trying to wear us out.Patience is all we need.Generally you spend $170million to get some kind of a return back.There is a whole industry of deep see drilling been developed as we speak.

  41. 41
    BirdsofpreyRcool Says:

    Gmlgdc — the only way i would consider GDP is via a coupon-bearing investment. Like elijah suggested. That said, i still want to look at thier BS and CF Stmts.

    Have heard CHK is laying down 20 rigs. Haven’t heard about current production curtailment yet, tho. That announcement would have MMR snap back in the faces of the Shorts like an Alien beast on an astronaut.

  42. 42
    Gmlgdc Says:

    ilike – your are right and Jim Bob is no idiot. It’s just frustrating to hear CEO’s make stupid off the cuff comments and investors listen.

  43. 43
    choices Says:

    Someone noted on another site that the gap on continuous NG chart in Sep 09 from $4 to $4.5 has now been filled-implies “bottoming”-I see the gap on NG continuous-not sure how much importance to place on this, Nicky, Jerome?


  44. 44
    jat Says:

    I met with Gil Goodrich about 4 hrs before the wire went out on the CFO resigning. Guess what DIDN’T come up in my 1-1? Thanks for the heads up, Gil.

    Anyway, we went through the entire capex/liquidity situation. I don’t see a problem this year given that they could cut a large portion of the capex, cut production guidance, and cover the remaining portion with a draw from the cash balance or the revolver. 2011 is too far to know anything real, but that won’t stop people from guessing at these gas prices. I covered my GDP short well before the CFO resigned, unfortunately, and agree with previous comments that’s it’s heavily shorted (and this has been true for quite a few months now). I’ll go out on a limb and say it’s risky to short here. 🙂

    But I have several higher confidence gas long targets to choose from in the stable, if I want, and so will everyone else. So a bounce in this group will give you short-term outperformance, but I just don’t think it’s sustainable with GDP assets and GDP management. And it’s still freaking expensive compared to higher quality peers on 2010 cash flow.

  45. 45
    Nicky Says:

    1164 is now the key level on the SPX.

  46. 46
    choices Says:

    Canaccord started AEZ at Buy

  47. 47
    BirdsofpreyRcool Says:

    jat — good color there. So, we can assume that Looney was NOT at your 1-on-1, eh?

  48. 48
    BirdsofpreyRcool Says:


    Market Update – stocks attempting to bounce after the poor Thurs close, although the move this morning feels tired and tepid; there isn’t a ton of volume/conviction behind the rally and longs are extra nervous about a repeat of yesterday and will be quick to exit/sell on any break in trading this afternoon. There are a lot of moving pieces on the tape today (the Greek/EU/IMF bailout, Trichet’s about face on IMF involvement, Korean torpedoes, a new mortgage mod plan, handful of tech earnings, etc), but the main focus for many remains month/Q end next week (Asset managers in 1Q are up 3.55% on average compared to the S&P 500 up 4.72%), the Fri 4/2 jobs report (which hits on Good Friday, when US markets will be closed), and the kick-off to Q1 earnings (AA on Mon 4/12). As tired, hesitant, and stretched as stocks seem, there remains a bid on weakness and this could remain in place at least through next Wed. Technically, 1177 remains a big level on the upside; on the downside, people are eyeing 1154.

    Equity Sectors – materials, which sold off hard into the bell on Thurs and were one of the market’s weakest groups, are up >1% today and snapping back. Buyers came right back into the metals stocks on yesterday’s weakness – TIE, X, AKS, CLF, CF, ATI, FCX, etc. NEM also getting a boost as gold prices rally on these Korean headlines. A weaker dollar is giving a boost to the materials. Financials are also very strong, up another 1%+ on the day; the banks continue to lead this group higher (a trend this week has been a rotation into the larger money center banks vs. the smaller/mid-cap regionals – this is continuing today as BAC, C, WFC, etc, are all up close to 2% on the day). Tech is underperforming, as software comes for sale on back of the ORCL earnings (just mild profit taking though….people weren’t really disappointed w/ORCL but the stock has had a nice run). Industrials, discretionary, utilities, are all trading about inline w/the tape. Health care is off small on the day and underperforming (HC has been a laggard for the last couple days following a strong run on back of the legislation passage).

    Best Performing SP500 stocks: RSH, SLM, WYNN, GNW, LEN, FSLR, LNC, AKS, PGR, X, TIE, CLF, COH, EK, GENZ, CF, URBN, JDSU, AVP, MI

    Weakest performing sp500 stocks: RRC, NBL, APA, WDC, ORCL, DPS, COG, NOV, EOG, CAG, AMT, SUN, PFE, SWN, GILD, RHT, HNZ, PCLN, SYK

    Commodities: Commodities are mixed this morning, with metals trading higher while oil/natural weakening. Gold just recently came off its highs trading at $1104, up ~0.95% on the day (gold getting a boost on the Korean headlines). Copper has traded flat this morning after rallying overnight, it’s up ~0.9% on the day (an aftershock in Chile is boosting). Oil has fluctuated so far today, but is now trading near its lows, right around $80, down ~0.5%. Natural has also fluctuated, again near its lows around $3.96, down ~0.4%

    FX: USD (DXY) has come off its morning highs and is trading near is lows, around ~$81.70, down 0.5%. The dollar is trading near its lows vs. the Euro, down ~0.95% The dollar sold off vs. the pound, and is down ~0.6%. The dollar has come off its lows a bit v. the Yen, and is down ~0.2%. The Euro has traded relatively flat vs. the Yen this morning, after moving higher over night; it’s up ~0.8%. The euro is getting a boost on the overnight EU-IMF settlement for Greece and the S&P affirmation of Portugal today. this is the Euro’s first positive session o the week.

    Corp. Credit: Corp. Credit is mixed with IG outperforming equities and HY trading more inline; IG14 has tightened 1 ¾ bps and HY have gained 1/4.

    Treasuries: Treasuries have rebounded today after yesterday’s sell-off; the Korean headlines prompting a bit of the flight to safety (although keep in mind how week the TSYs have been all week). The 2s are yielding 107bps and the 10s are yielding 3.86%. The 2-10 year spread has steepened a bit to 280bps.

    Sovereign CDS – pretty quiet despite the IMF/EU settlement and despite the Euro bounce; all the usual suspects are tighter (UK, Portugal, Italy, Greece, etc) but only very slightly.

  49. 49
    jat Says:

    Yeah, I wish Looney had come in wearing a Hawaiian shirt and said good bye, that would have been clearer.

  50. 50
    BirdsofpreyRcool Says:

    …except that he is sticking around for 6 months.


  51. 51
    elijahwc Says:

    GDP / GDPAN: Got filled on the bid for some GDPAN late yesterday at 35.50. Appros to your comments above (very much appreciated) one can get filled around 34.75ish today and enough has traded to safely assume that someone out there will probally make some available at prices lower.

    I don’t think that they are going away and that thesis is the pass line bet on this instrument.

    Question,I wonder what Aubrey is going to lay down here and what the consquences might be? Is there a give up?

    Goodrich Petroleum and Chesapeake Energy Announce Joint Venture in Haynesville Shale in North Louisiana
    6/16/2008 7:02 AM

    … Chesapeake has agreed to pay Goodrich approximately $178 million for the deep rights to approximately 10,250 net acres of oil and natural gas leasehold comprised of a 20% working interest in approximately 25,000 net acres in the Bethany-Longstreet field and a 50% working interest in approximately 10,500 net acres in the Longwood field. Chesapeake has also agreed to purchase 7,500 net acres of deep rights in the Bethany-Longstreet field from a third party, bringing the ownership interest in the deep rights in both fields after closing to 50% each for Goodrich and Chesapeake. Chesapeake will be the operator of the joint venture for the Haynesville Shale development and closing is expected to occur on or before July 15, 2008. Goodrich is retaining the shallow rights (through the base of the Cotton Valley sand) and the existing production and reserves with respect to its 70% interest in the Bethany-Longstreet field and its 100% interest in the Longwood field and is retaining its interest in both the shallow and Haynesville Shale rights on all of its East Texas assets.

    ….Aubrey K. McClendon, Chesapeake’s Chief Executive Officer stated, “Chesapeake is very pleased to announce this joint venture with Goodrich. The acreage we are acquiring is well located in the heart of the Haynesville Shale play and we believe that it will be highly productive. We currently anticipate drilling up to 440 horizontal Haynesville Shale wells on this acreage with Chesapeake and Goodrich each owning 50% of the wells. We are aware that many other companies competed with us for this opportunity and we appreciate that Goodrich elected to partner with Chesapeake.

  52. 52
    elijahwc Says:

    #51 continued: I guess what I rally wanted to ask is are there normally additional held by production requirements in these JV’s? I don’t know.

  53. 53
    BirdsofpreyRcool Says:

    elijah — good question. I figure, whoever is operator gets to make the calls. But if a non-operator wants to buy out or take over from an operator, there should be provisions in the JV that spell that out.

    Things I know: gas shale in the Barnett and Fayetteville and East Texas are not as economic as gas shale in the heart of the Haynesville and Marcellus. Understand that a good part of GDP’s Haynesville is in East Texas.

    Would love to see some production curtailments announced on Monday morning. Not hearing anything ’bout that… yet. But sure would be nice to wake up to.

    That said, heard NYC is going to be in the 80’s at some point next week. Not good for nat gas prices, I would think, when traders can wear flip-flops waiting for their morning trains.

  54. 54
    jat Says:

    BOP, love the continued natural gas analysis vis-a-vis our sartorial choices up here in the Big Apple.

    To answer Elijah’s question, I think GDP said that they are near 100% HBP in most areas with 80-85% in others. CHK has the flexibility to drop 1 rig in the JV and I think GDP can drop on additional flex which is working on a case by case basis. All that was included in their estimate for potential capex reduction.

  55. 55
    BirdsofpreyRcool Says:

    jat — were you in attendance for the DVN CEO’s (Nichols) comment about the productive viability of the Ultra-Deep gas play?

  56. 56
    elijahwc Says:

    jat – thanks. Apparently they inferred to the folks at Pritchard that they would not have to tap either the cash or the revolver. Did you get a different impression in your 1 on 1 or are you just saying this is the backstop on this year?

    Pritchard Capital Partners, LLC: GDP ($16.88-B-$28.00) – GDP: – 03-24 8:15 AM

    “Hosted a call yesterday with President Rob Turnham.

    Current liquidity situation is solid with $125 mm in cash at YE 09 and full
    availability on $175 mm revolver, which company expects to get reaffirmed at
    $175-$200 mm in 45 to 60 days. Believes they can get through 2010 without
    tapping credit line. Lots of flexibility in $255 mm 2010 capex budget, which could
    come down if nat gas prices stay depressed, including fewer wells in core Bethany Longstreet Field. 85,000 net acreage position in Haynesville Shale in East TX and LA likely to increase. Back-to-back Taylor Sand Cotton Valley horizontals planned for Q2 10 in South Henderson Field in Rusk County, with 7 total budgeted for 2010. Company very excited about its 22K net Angelina River Trend acres in Nacogdoches and Angelina Counties; EOG ($94.14-NR) recently purchased 39,500 acres for ~$4,100/acre nearby in Nacogdoches. GDP plans 2 wells here in 2010 (Q2 and Q4) and a 2 rig program in 2011/2012 as this is the one area it does not have a strong HBP position. These wells are more expensive at $10 mm each due to the formation depth in this part of the play. EURs likely need to be in the 6.5-8.5 Bcfe range for the wells to be solidly economic”

  57. 57
    jat Says:

    that must’ve been the lunch? nope, had conflicts unfortunately.

  58. 58
    jy Says:

    Re: #44 and GDP. jat-Help me out here. How can the CEO of a public company disclose to a private party such information as the imminent resignation of the company CFO unless it is disclosed simultaneously to the public? Seems that that sort of information would be “material”, and as such has to be publicly disclosed. What am I missing?

  59. 59
    jat Says:

    You don’t need to tap the revolver if you draw down the cash.

    But unless you get a much better than expected gas price, you’re going to draw down cash. I don’t think Pritchard disagrees, they are discussing the need to draw down the credit facility, right? Don’t see a reference in #56 to cash.

    At $5.50 gas/$80.00 oil in 2010, you have about $105 in cash flow from ops, which assumes prodn at the top end of guidance. You can cut the $255 capex down to $175 minimum this year by cutting leasehold / rigs / other things. So you’re still outspending, the money has to come from somewhere.

    There isn’t a liquidity crisis, I’m not short here.

  60. 60
    BirdsofpreyRcool Says:

    jy — i don’t think he did. jat was just joking.

  61. 61
    jat Says:

    RE 58: He didn’t.

  62. 62
    jat Says:

    Yeah we make a lot of jokes up here in New York in between corn beef sandwiches.

  63. 63
    BirdsofpreyRcool Says:

    jat — sometimes it’s either “joke or cry.” That is why Trading Desks always tell the best jokes!

  64. 64
    Dman Says:

    jat – would you care to rank your high quality potential gas longs ?

    And/or shorts for that matter.

  65. 65
    elijahwc Says:

    jat – thanks, you add great value on GDP, and, as a solvency bet I’m feeling much better on GDPAN. And looking forward to the rent check.

    That being said I’m sure that they will reward me by announcing deferral after the close today.

  66. 66
    jat Says:

    I’d rather not ramble on in detail, I’ll save that for Z.

    But if you were a fund manager and you wanted to get long gas as a contrarian I think there are a lot of things with better assets that are cheaper than GDP on cash flow multiples, and that have a better ability to manage their growth than this continual “what will the revolver be set at” discussion we’ve had with GDP for the last 3 yrs.

  67. 67
    tomdavis12 Says:

    BOP: Any rig data available today?

  68. 68
    BirdsofpreyRcool Says:

    tomdavis — rig data? like on the DJ rig??

  69. 69
    tomdavis12 Says:

    no # of rig added or subtracted for the week.

  70. 70
    Gtinvest Says:

    Rig counts us +17, horizontals +14 GAS *2, OIL + 15 . hope that helps

  71. 71
    BirdsofpreyRcool Says:

    ha! tomdavis… you follow the rig market much more closely than I.

    Ask me a good old-fashioned geologic or geophysical question. I am not a go-to person on the overall rig market. But thx for asking!

    yep… you got me 😉

  72. 72
    BirdsofpreyRcool Says:

    Saved the day, GT. Thank you.

  73. 73
    tomdavis12 Says:

    Got up 17 from Z. Anyone remember the high water crude/NG ratio? Today 20.6. I seem to remember about 22 as peak. I know it does not have much value. Just curious.

  74. 74
    BirdsofpreyRcool Says:

    (The Baker Hughes Rig Count… oops)

  75. 75
    DrLink Says:

    IOC- How fickle is the market that would lop off $500 mill of a companies value based on one Minkow fake news release. Wayne and Phil have some real numbers to work with now should they ever decide to take this guy on. This lawsuit in dollar terms would cost a fraction of the market cap loss today if it costs anything at all, ever. The good ‘ol USA , anybody can sue anybody , combine that with freedom of speech and the underbelly of society comes out.

  76. 76
    reefguy Says:

    ioc- shorts destroying price….

  77. 77
    BirdsofpreyRcool Says:

    tomdavis — saw a blurb on seekingalpha about that today. There was a graph…think it peaked around 22 or so, yes.

  78. 78
    tomdavis12 Says:

    BOP: I have had enough fun for one week. One ugly week. BOP thanks for your great help. I really do hope you accept the tshirt. Chow.

  79. 79
    BirdsofpreyRcool Says:

    nope… more like 25+


  80. 80
    BirdsofpreyRcool Says:

    Tomdavis was right to point out the Baker Hughes Rig Count… with the increase in north american rigs, nat gas prices took another leg down. More rigs, more drilling, more nat gas. ugh.


  81. 81
    jiveyjr Says:

    EOG turns green; I added a thimble full this morning

  82. 82
    jiveyjr Says:

    I thought SD was going to trade in the $6’s but I guess Bill started buying again

  83. 83
    BirdsofpreyRcool Says:

    jivey — way to go! thx for sharing. Figured we would get somewhat of a rebound into the close. There is just too much that could happen over the weekend. Good and bad. But the “bad” is pretty well priced in, at this point.

  84. 84
    jat Says:

    MS put out a positive trade opinion on SD today. That and Bill no doubt.

  85. 85
    RMD Says:

    Im hearing from pvt. equity that money is being thrown at midstream deals, forcing him to do deals (and suggesting deals being done at wrong prices for the buyer).

  86. 86
    jiveyjr Says:

    awright…everyone have a nice weekend…I’m going to Z country next week to the horse races

  87. 87
    BirdsofpreyRcool Says:

    Interesting week. Will be great to have Z back next week. Thanks to everyone for showing up while he was taking a much-deserved vacation.

  88. 88
    ilikericky Says:

    BOP Thanks

  89. 89
    elduque Says:

    bop thanks for all your input

  90. 90
    isleworth Says:

    IOC whacked again. This story is even more alarming IMHO…..


  91. 91
    BirdsofpreyRcool Says:

    Thanks guys. But it wouldn’t be worth it without having y’all around. Thx for hanging out here during (what turned out to be) a tough week.

    Now, if we could just get CHK to announce nat gas production curtailment on Monday morning…

  92. 92
    BirdsofpreyRcool Says:

    Natural Gas Futures Fall to Six-Month Low as Rig Count Advances
    2010-03-26 20:21:21.447 GMT

    By Asjylyn Loder
    March 26 (Bloomberg) — Natural gas fell to a six-month low in New York on surplus fuel inventories, a rising rig count and mild weather that is expected to cut demand.
    The U.S. added two natural gas rigs, bringing the count to 941, up 16 percent from a year earlier, Baker Hughes Inc. said today on its Web site. The increase in gas rigs was the 13th in a row. During that time, 190 rigs have been added.
    “We’ve had all these stops and starts, with good news, bad news, good news, bad news,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.
    “That’s not enough to get natural gas out of the trend that it’s in.”
    Natural gas for April delivery fell 10.9 cents, or 2.7 percent, to settle at $3.872 per million British thermal units on the New York Mercantile Exchange, the lowest closing price since Sept. 28. Natural gas has dropped 31 percent this year.
    The market is now in a “holding pattern” around $4 as traders wait for any economic news that will support a move in the fuel, Rose said. “I’m a reluctant buyer at $4.”
    The heating and power-plant fuel dropped below $4 yesterday for the first time in six months after a report from the Energy Department that inventories gained 11 billion cubic feet in the week ended March 19 to 1.626 trillion.
    “We’ve broken below a significant level at $4,” said Teri Viswanath, director of commodities research with Credit Suisse Securities USA in Houston. “Now that we’re below $4, you’re seeing structural changes. Coal generators at $4 gas will not recapture market share, and sub-$4 pricing is not a siren call for LNG cargoes to head this way.”

    Imports May Rise

    U.S. imports of liquefied natural gas may rise 45 percent in 2010 to approximately 1.8 billion cubic feet per day, the Energy Department forecast March 9 in its monthly Short-Term Energy Outlook. The estimate for 2010 imports was 1.6 percent lower than the February forecast.
    Traders are not yet convinced that the structural changes have wiped out weakness in price and may wait for prices to fall further before buying, Viswanath said. At a seminar with investors this week, about 60 percent thought prices still had further to fall.
    “There’s a saying, ‘Don’t catch a falling knife,’” she said. “That’s what’s happening here.”

    Surplus Grows

    The storage surplus compared with the five-year average widened to 8 percent from 4.7 percent in the previous report, according to department data.
    Deliveries of gas to industrial consumers fell 512 billion cubic feet, or 7.7 percent, in 2009 from the previous year, according to the Energy Department.
    “You’ve got crummy weather, a crummy economy, a growing source of supply and an economy that is constricting demand,”
    said Mike Fitzpatrick, vice president of energy at MF Global in New York.
    U.S. production reached an all-time high of 26.3 trillion cubic feet in 2009, up 2.2 percent from the previous year, Energy Department data show.
    “Now that you’re below $4, that’s well below the break- even point for bringing new facilities online, so that’s going to eat into supply,” Fitzpatrick said. “Not today or tomorrow but over time.”
    Heating use will be below normal in most of the U.S.
    through April 2, said David Salmon, a meteorologist with Weather Derivatives of Belton, Missouri, in his daily report.
    “Some early spring chills hang over the eastern U.S. for a time next week, but eventually a big warmup in the middle of the country spills eastward to gobble up all the big cities, driving the population weighted heating demand to well below normal,”
    Salmon said in his report.

    ETF Slips

    Falling natural gas prices have driven the $2.9 billion U.S. Natural Gas Fund to new lows. The exchange-traded fund fell
    16 cents, or 2.2 percent, to settle at $7 on the New York Stock Exchange. The fund is down 31 percent this year and 86 percent since it began trading in April 2007.
    Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 8.82 cents, or 2.2 percent, to $3.9226 per million Btu, according to data compiled by Bloomberg.
    Gas futures volume in electronic trading on the Nymex was 156,120 contracts as of 2:43 p.m., compared with a three-month daily average total of 221,000. Volume was 257,648 yesterday.
    Open interest was 837,152 contracts, compared with the three- month average of 791,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

  93. 93
    elijahwc Says:

    Z, BOP needs her Tshirt wrapped around a bottle of Opus One.

  94. 94
    BirdsofpreyRcool Says:

    ooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo… yum. Opus One!!

  95. 95
    BirdsofpreyRcool Says:

    EXXI on the tape with an “automatic mixed shelf filing.” Pulling up the form, I see there are no specific amounts of debt, common, preferred, etc. filled in. So, think this is just a typical Treasurer/CFO move.

  96. 96
    RMD Says:

    I half guess that if CHK curtails , there is a 2 hour rally and the gassy stocks close down on the day. Just end of Fri. musing.

  97. 97
    RobBanks Says:

    Energy XXI Files Mixed Securities Shelf >EXXI

    Eek, don’t tell me they…uh…didn’t tell the truth about funding capex out of cashflow. They did say that, didn’t they? No need to go to the equity markets?

  98. 98
    RobBanks Says:

    Just saw BOP’s post. Will you elaborate when you get a chance?

  99. 99
    BirdsofpreyRcool Says:

    RobBanks — it’s kinda like reordering checks from your bank after you have written the last one. Doesn’t mean you’re gonna write a check… but you have a blank one around, in case you see something you want to buy and don’t have enough cash in your pocket to buy it.

  100. 100
    BirdsofpreyRcool Says:

    RMD — #96 And I half believe you would be correct.

  101. 101
    PackMan Says:

    Hope you had a good vacation Z … we missed ya; but BOP held the fort even though our names did not.

  102. 102
    PackMan Says:

    Just saw this story on IOC … check it out. http://www.businessinsider.com/shia-labeouf-pimps-interoil-stock-2010-3?utm_source=twitterfeed&utm_medium=twitter

  103. 103
    zman Says:

    Back from Gulf Shores. Had a blast. Back to regular posts on Monday.

    Thanks to you all for keeping me updated and often entertained. Special thanks to Nicky and JB on charts and Jat on H.W. color.

    Special-special thanks to BOP. Her T-shirt, coffee cup, hat, bumpersticker, etc are her’s for the asking. Great idea goes to Eli on the Opus One and now that I’m back and seeing that that particular bin is empty, I’ll send the shirt to you for wrapping around a magnum of that most excellent vino and sending along to the Bird.

  104. 104
    Physicians Formula Organic Makeup Says:

    Physicians Formula Organic Makeup

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