07
Apr

Wednesday – Oil Preview Plus

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Market Sentiment Watch: I'm guessing the rest of the week will be somewhat anti-climatic after yesterday's moves in a couple of names, especially the SSN which ended the day up 43%. I took profits in the ZIM on SSN as it made the move I was looking for and as BOP often reminds us "plan the trade, trade the plan" which for the ZIM means find inefficiencies and watch them unwind and don't then become greedy. The ZLT continues to hold it and that portfolio is longer term and greedier by nature. BEXP's secondary acted much like the last one ending the day higher. Also yesterday we saw a number of comments regarding the suspected small side of the EIA's coming revisions and this sent gas tumbling. I suspect the revisions will be bigger than the current 1% thinking. It may take until Fall before we see that however as EIA doesn't plan on revising the 2009 data until then.



In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today – EOG Analyst Day
  5. Odds & Ends

Holdings Watch:

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

  • $12,900
  • 55% Cash
  • I'll have the quick view updated on the ZCAT, ZIM, ZLT page a little later in the day.
  • Yesterday’s Trades:
    • EOG - Added (2) April $100 calls for $1.75 with the stock at $98.05 and their analyst day tomorrow.
    • SWN - Sold the April $41 calls for $1.65, up 97%, with the stock at $42.
    • HK - sold the April $20 calls for $2, up 105%, with the stock at $21.93.
    • Sold half of my MMR April $16 calls for $1.30, 116% since entry yesterday.
    • EOG - Added (8) more EOG April $100 contracts for $1.55 with the stock at $97.55. Analyst day tomorrow. Webcast starts 8 am.
       

 

ZIM (Zman Inefficient Markets portfolio)

  • $12,950
  • 99.6% Cash (there is a small DVN position but it's worthless) 
  • Yesterday’s Trades:
    • Sold the 5,000 SSN for $0.70, up 64%.  I continue to hold SSN in the ZLT for more news late this week or early next.
    • Sold the 40 April $17.50 calls, up 45% to my average cost, with stock trading at all time highs around $18.30, despite the secondary offering announced last night. I continue to hold calls in the ZCAT and the common in the ZLT.

Commodity Watch:

 

Crude oil inched up $0.22 to close at $86.84 yesterday.  After the close, the API released a mixed bag of a report (see below) but if we get that number on gasoline we should see prices hold the current level. I suspect we won't and that some profit taking may set in in the near term. This morning crude is trading off 60 cents on a stronger dollar. 

Natural gas retreated $0.18 to close the day at $4.10 yesterday as the EIA said revisions to its gas model would be about 1%. I find this number to be small. This morning gas is trading flat.


Early Read On Natural Gas Storage: Street is at 28 BCF for tomorrow’s report.

  • Last Week: 12 Bcf injection
  • Last Year: 17 Bcf injection
  • 5 Year Average: 20 Bcf injection
  • 10 year Hi: 68 Bcf injection
  • 10 year Low: 39 Bcf withdrawal

 

Oil Inventory Preview


API Watch: 

  • Crude: UP 1.07 mm barrels
  • Gasoline: DOWN 2.9 mm barrels
  • Distillates:  UP 0.723 mm barrels

ZComment: Expectations are close to the five year average change in inventories. I think crude could fall back a little more than this as I expect a drop in imports beyond what we saw last week but that should be fairly inconsequential to crude prices. The bigger drawdown on gasoline needs to be met to support both current gasoline prices and I think that could be the weak link in today's report. In short, I see a risk that demand may not be sufficient to overcome rising gasoline production and, to a lessor extent, rising gasoline imports.

Stuff We Care About Today

EOG Analyst Day - Lots of New Stuff

  • Eagle Ford Shale: EOG Spills the EFS Beans and they are Oily!

    • 580,000 net acres - 87% of their leases are along the northern side of the play in the oil window
    • Tully C Garner 97H drilled - first EOG EFS gas horizontal - Oct 2008
    • Milton #1H drilled in 2009 - first EOG EFS oil well and delineation well

      • IP 668 bopd from an 1,800 foot lateral, overpressure > 7Kpsi, called it an inefficient completion
      • the Milton 3H delin well had a 2,400 foot lateral, flowed at 909 BOEpd, put EUR at 365 MBOE on Nov 19, has produced 40,000 barrels to date.
    • EFS oil window comments:

      • East side: 481 MBOE per well EUR, after tax ROR of 95% (these cost $5mm completed)
      • West side: 318 MBOE EUR, ATROR of 66% ($4.5mm)
      • Note they put the ATROR of the gas window wells at 27% with 5.5 Bcfe per well
      • Drilled 15 delineation oil wells across 120 miles

        • IPs ranged from 218 Bopd in the west to
        • 1,658 bopd in the northeast up in Gonzales County (this was a 3,711' lateral)
        • Note that these last are Bakken style rates from short laterals.
    • They put their net potential reserves after royalties from both sides of the play at 900 million barrels.
    • EFS production is about to jump:
      • 2010E: 6 Mboepd
      • 2011E: 40 Mboepd
      • 2012E: 75 Mboepd
      • 2013E: 115 Mboepd
      • 2014E: 150 Mboepd
      • For context, total company production was 349,000 BOEpd in 4Q09
  • Bakken:  only new stuff on this section
    • Carat 2-33H well in Montana - assuming they will talk about this on the call
    • Round Prairie 1-17H well in extreme west North Dakota
    • Total Bakken reserve potential went from the long, long, long standing 80 mm boe to 420 mm boe  (the 80 mmboe was actually all booked in 2009)
  • Spearfish Play - North Dakota "Waskada South"
    • 80,000 acres in ND, southern extension of the Waskada field in Manitoba
    • IPs look higher than the avg Canadian Waskada well, avg 300 boepd IP but it's early, 95% oil
  • Niobrara
    • 400,000 acres, adding more
    • First well, Jake 2-01H, produced 50,000 bo in first 90 days, IP was 1,558 mboepd
    • 4 more wells drilled, two IP at 730 and 1,100
    • 2 rig program, $3.4 mm per well
  • Total Company Production Targets set for 2011 and 2012
    • 2010: reaffirmed at 13%
    • 2011: set at 19%
    • 2012: set at 21%

Conference call starts at 9 am EST, many more comments later in the comments section as they released a dozen 30 page presentations on various plays and aspects of the company.

Odds & Ends

Analyst Watch:

  • TBA

194 Responses to “Wednesday – Oil Preview Plus”

  1. 1
    VTZ Says:

    Nice EOG comments on Eagle Ford.

  2. 2
    VTZ Says:

    10-year auction today could get ugly. It seems like there is a lot of worry about it so if it goes ok or good, we could rally further.

  3. 3
    zman Says:

    Hear ya V, market definitely needs that wall of worry to climb. I think we are up until earnings, then profit taking, anyone who misses gets trashed with little regard for valuation.

    EOG – getting marked higher. If you go back a couple of years in their chart you can see a big rally upon their analyst day when they announced oil plays. This should be more than just a quick move and is more than I expected, especially on the EFS. This is game changer on both growth and growth potential and now that its out I’ll be adding calls for the ZIM as well.

  4. 4
    zman Says:

    Analyst Watch:

    FBR initiating with Outpefromers on the some bulkers:

    SB, NM, GNK, also adds EGLE at Market Perform.

  5. 5
    zman Says:

    EOG call starting now:

    http://www.eogresources.com/investors/investor_pres.html

    also all the slide shows are on this page.

  6. 6
    zman Says:

    EOG saying they have another horizontal oil play they’re working on but that they not going to disclose today.

  7. 7
    zman Says:

    NG up 6 cents
    Oil down 50 cents

  8. 8
    zman Says:

    EOG doing a good job of showing the advantages of going horizontal oil vs:

    Canadian oil sands,
    Deepwater
    International

    Scalability of investment, high ROR

  9. 9
    zman Says:

    EOG reserve potential:
    Their potential reserves look goes from:

    130 mm boe + 14 Tcf

    to

    1.7 billion barrels + 29 Tcf

  10. 10
    zman Says:

    EOG Niobrara – very good rates, too soon to discuss EURs, would not disclose but it has gotten so much publicity that they have to talk about it some.

  11. 11
    zman Says:

    Haynesville/Bossier potential went from 3-4 Tcf to 10 Tcf

    Hornriver goes from 6 to 9 Tcf

    Uinta goes from 1.8 tcfe to 6.8 Tcfe (their only non horizontal play)

  12. 12
    zman Says:

    2010 growth of 13% will have liquids growth of 47%

    2011 growth of 19% will have liquids growth of 60%

    2012 grows 21%

    these are AFTER the sale of significant gas property sales expected by year end.

  13. 13
    zman Says:

    re 12 – they have beaten Aubrey to the punch by a mile.

  14. 14
    skimo Says:

    EOG 2012 liquids 3.3 X 2009 production!

  15. 15
    zman Says:

    EOG

    They think the Eagle Ford oil discovery will be one of the largest discoveries in the U.S. in the last 40 years.

    Drilled 15 delineation wells over 120 miles of the oil window of the play.

  16. 16
    bill Says:

    who has efs acreage 2nd question

    best plays in efs?

    hk,sm,rose????

    efs looking good

  17. 17
    zman Says:

    If I were them I’d sell their Trinidad operations off as soon as possible and reinvest in the EFS and Niobrara.

  18. 18
    zman Says:

    HK and PXD are probably your names with the most oil window exposure but also dry and wet gas, ROSE liquids rich and dry gas window, SM is there, APC, SFY. No one has this kind of oil position here.

  19. 19
    zman Says:

    CHK is in the EFS too, not sure exactly where all but should have oil window from legacy Austin Chalk at least plus a concerted effort to get oily.

  20. 20
    zman Says:

    EOG Niobrara (WY/CO)

    3 wells so far, high IPs on all but short histories. The first produced 50,000 barrels in 3 months. 2 more wells drilled but not yet completed.

    Niobrar – PETD, CHK

  21. 21
    Wyoming Says:

    http://www.scribd.com/doc/29535533/Oil-Services-April-1

  22. 22
    zman Says:

    ZTRADEs – ZIM – EOG

    Added 6 EOG May 105 Calls for $2.78 with the stock at 100.50

    Added 40 April 110 Calls for $0.30 which I plan to be rather quick with but are obviously very high risk.

    See post today and comments below it for details on what I perceive to be a very strong analyst day presentation which is underway and should last a good portion of the day.

  23. 23
    jat Says:

    warning on PXD, everyone here in hedgie world has been playing that long into this day…

  24. 24
    jat Says:

    not saying it doesn’t work LT, just saying

  25. 25
    zman Says:

    here ya Jat, I’m playing it straight on EOG.

  26. 26
    jat Says:

    that opening presentation was fantastic. I am reminded of Shannon Nome’s upgrade of the stock at $83.00 on 11/3/09 on the thesis that EOG was quietly buying up all the oil shale acreage in the world. Well, here it is in pdf format.

  27. 27
    zman Says:

    EOG doing a big science fare on horizontal drilling and shales.

    Wish BOP were here, EOG getting sick on the science. Taking 15 nanometer slices of a piece of an EFS core, using Electron Microscopy to see both the pore sizes and the pore throat sizes. They can see the pore throats are big enough to pass oil molecules through them. EFS bigger than Barnett pore throats.

  28. 28
    ram Says:

    Did EOG just put on a big buy me presentation?

  29. 29
    zman Says:

    Ram – yep, going on all day, very good stuff.

  30. 30
    zman Says:

    Jat – it reminds me of their 2008 presentation which sent the shares zooming, albeit in a much higher oil price environment.

  31. 31
    bill Says:

    hk getting a move too

  32. 32
    zman Says:

    Oops Watch: Actually picked up 15 of those May 105s EOGs, typo in my trade system, will sell out 10 of them in a minute to get to 5 of those.

  33. 33
    tomdavis12 Says:

    Z: Got the proxy info re EOG last night. Annual meeting 4/28 down in your neck of the woods (Houston). Papa has not raised salary since 2004. Has collected plenty of stock. 4 largest shareholders Davis Selected Advisors 23.7M (9.4) Blackrock 15.8M (6.3) T Rowe Price 13.2M (5.2) Capital Research Global Inv 12.9M (5.1). Management + Board own 3.5M. Not big ownership. I do not think that figure includes in the money stock options that are not exercised.

  34. 34
    zman Says:

    EOG’s Eagle Ford Shale discussion up next.

  35. 35
    reefguy Says:

    EF- keeps moving eastward…

  36. 36
    zman Says:

    Yep and the East is the good stuff. See slide 18

    http://www.eogresources.com/media/slides/ac_st0410.pdf

  37. 37
    zman Says:

    and slide 20

  38. 38
    zman Says:

    Oil inventories in 15 minutes

  39. 39
    zman Says:

    TAT at 3.75
    SSN pulling back to 0.71 today

  40. 40
    zman Says:

    HK is on the west side by the way in the oil window. PXD is on the east.

  41. 41
    reefguy Says:

    35,36,37…does not stop at Lavaca county

  42. 42
    zman Says:

    Right, they’ve already made fun of HK once.

  43. 43
    BirdsofpreyRcool Says:

    hey… good morning. Been traveling. Back. Not good for much yet… except to say KUDOS to z on that SSN trade.

    Damn. Wish I had done it.

    That was a heck of a great, real-time demonstration of what the ZIM is all about. And you have to stay tuned and move quickly on it. My bad. I lost out. Won’t sit on the sidelines next time.

  44. 44
    BirdsofpreyRcool Says:

    reef — neophyte question on EFS… it charges the Austin Chalk, correct? So, can one just follow the AC trend to get a feel for the geographic lay of the land for EFS?

  45. 45
    zman Says:

    Thanks much BOP, great to have you back.

    These EOG EFS rates would be respectable from a much bigger well in the Bakken.

  46. 46
    reefguy Says:

    44- you are a fast learner

  47. 47
    reefguy Says:

    East of Lavaca is APache and Conoco and EVEP

  48. 48
    zman Says:

    BOP – which would put CHK there in a big way from legacy production, their original boom / bust.

  49. 49
    zman Says:

    EIA Inventories

    Crude up 2.0 mm barrels
    Gasoline down 2.5
    Distillates up 1.1

    sort of close to the API numbers.

    Demand remained strong for gasoline, third week just over 9 mm bpd.

    Crude coming off slightly on the distillate build

  50. 50
    1520sbroad Says:

    EOG and HK are partners in some wells in EFS aren’t they?

  51. 51
    zman Says:

    Re 50 – that would be the Bossier in E. Texas

  52. 52
    BirdsofpreyRcool Says:

    CHK + Austin Chalk… remember that period of history well. It wasn’t until they tried to extend the trend into Lousianna that it all went terribly wrong. CHK still HBPs that acreage? Woulda thought those wells would have died off yrs ago. reef??

  53. 53
    zman Says:

    More EIA…

    Crude imports were up big week to week so that explains the crude number easily. In fact, refinery demand rose 400,000 bopd week to week as well. They are liking the higher margins.

  54. 54
    1520sbroad Says:

    #51 – thanks.

  55. 55
    zman Says:

    EOG – East EFS – After tax ROR would still be 15% to $44.

    In the west the 15% return would be hit at $55 oil.

  56. 56
    zman Says:

    EVEP not moving on this Reef. Not yet.

  57. 57
    skimo Says:

    EOG I’m sure this guy is a gereat operations guy but I really hate to have people read to me from the slides

  58. 58
    reefguy Says:

    PXD not moving either

  59. 59
    zman Says:

    EOG on a 10 minute break, time for the analysts to call into the home office squawk boxes.

  60. 60
    RMD Says:

    jat #26 adds to my respect for Shannon in the future.

  61. 61
    zman Says:

    S&P not looking chipper, Nicky?

  62. 62
    zman Says:

    RMD – she was always smart, a bit of a banking schmoozer when at Lehman, but smart.

  63. 63
    BirdsofpreyRcool Says:

    pretty huge CIGX news… for those who follow that little non-energy special situation…

  64. 64
    isleworth Says:

    KOG meeting with OPCO in NY on 4/14

  65. 65
    elijahwc Says:

    In honor of BOP’s return:

    CIGX Star Scientific announces collaboration with Roskamp Institute on Beta-amyloid discovery and Alzheimer’s disease (3.31 0.40)

    Co announced that it has completed a “Research and Royalty Agreement” with the Roskamp Institute’s affiliate, SRQ Bio, LLC, under which the Institute will conduct research on a compound developed by the company’s Rock Creek Pharmaceutical subsidiary that medical researchers at the Institute believe may have an application in the treatment of Alzheimer’s disease. Preliminary testing of the compound has produced promising results when applied to cells, and the compound is being explored further for its application to treat a variety of neurological conditions, including Alzheimer’s. Preliminary tests performed by the Roskamp Institute show that when the compound developed by Rock Creek is applied to cells, B-amyloid is reduced. Also, the compound appears to encourage new neuronal cell growth. Results in cells do not necessarily translate to human testing, and additional work needs to be completed to determine whether the compound will have significant B-amyloid lowering effects in humans.

  66. 66
    bill Says:

    oil numbers taking down all energy names

  67. 67
    zman Says:

    Market taking down all energy names.

  68. 68
    BirdsofpreyRcool Says:

    elijah — and it is not a drug… so, regulated by FDA, but doesn’t require the 3 phase approval process.

  69. 69
    zman Says:

    EOG Barnett discussion starting

  70. 70
    reefguy Says:

    CIGX- Thank you BOP

  71. 71
    cargocult Says:

    I like whats happening with CGIX but my physician wife reminds me that getting a product to market is way more problematic than drilling a 25,000 foot hole in the ground in the middle of the GOM. Are you sure no FDA hurdles? That said, a product and a stock are two different animals.

  72. 72
    ram Says:

    Thank you BOP

  73. 73
    Nicky Says:

    Good morning all. Z – re # 61 – did i not say two days ago that my preferred target area was 1190 and 1194 and then a reversal? My preference is that this is wave iv down and higher highs are still out there. Support is at 1182,1180,1178 and 1174. We would have to break 1174 for signs of a bigger correction.

  74. 74
    cargocult Says:

    Z, from the news on EOG it sounds like it is a significantly different company, reserve and CF wise. Is this news a game changer?

  75. 75
    tomdavis12 Says:

    Z: Are you thinking of piggybacking any other call activity into other EFS players and their earnings? Or a little too early for that.

  76. 76
    Nicky Says:

    Okay if we are going lower then the bounce has to stall no later than 1187/88.

  77. 77
    zman Says:

    Cargo – I think it goes higher from here. The game got changed for them a couple of years back so this is a game enhancer.

  78. 78
    BirdsofpreyRcool Says:

    cargo — there can always be FDA hurdles… even when there shouldn’t be FDA hurdles. But this is like bringing a new supplement to market, like aspirin. Not like bringing a new drug (like DNDN). 100% agreed on it’s easier to drill to 25k ft than to drill thru the FDA NDA process.

    Now back to our regularly-scheduled, all-energy, all-the-time programming.

  79. 79
    zman Says:

    Tom – I own the common in HK and ROSE, not looking to play any more small ball for now on it. If EOG dips again I may add more and I do plan to roll the EOG calls taken in the ZCAT yesterday, maybe tomorrow. Numbers here are going to come up here, both on 2011 EPS/CFPS but also on NAV, probably in a pretty big way there.

  80. 80
    BossmanG Says:

    Z, any thoughts on SD/ARD?

  81. 81
    zman Says:

    Thanks much Nicky

  82. 82
    zman Says:

    EOG Rockies discussion starting (Bakken, Three Forks, Niobrara, Spearfish)

  83. 83
    zman Says:

    BEXP holding strong

  84. 84
    zman Says:

    Carat well being fracced now, this is their Montana test, next few days should have data.

  85. 85
    zman Says:

    84 = EOG’s well, BEXP is about to spud a neighboring well.

  86. 86
    zman Says:

    EOG’s crude by rail system is fully functional and is exceeding their expectations.

  87. 87
    zman Says:

    EOG – 400,000 net acres leased in the Niobrara since 2008. First time to talk about it.

    In 3Q09 – Jake 2-1H, >50,000 bopd in 90 days. Then drilled 4 more wells.

  88. 88
    VTZ Says:

    Gold is likely to break out if it holds here for the close… could be an indicator of the broad market breaking out.

  89. 89
    zman Says:

    2nd well did 700 bopd on a 2,000 foot lateral. Short due to drilling problem.

    3rd well did 1,100 bopd on a 5,000 foot lateral. He said open hole, unfracced on that but it is declining and has not stabilized.

    4th and 5th about to be completed. High pressure while drilling these.

    These are very impressive rates.

  90. 90
    zman Says:

    EOG is now 4th largest U.S. onshore oil producer. By 2012, they should be second only two Chevron.

  91. 91
    zman Says:

    EOG Haynesville/Bossier discussion starting

  92. 92
    zman Says:

    Southern portion of the E. Texas Bossier seeing better IPs, nothing new, north is weaker, south is a sweet spot. This is where EOG and HK are focused on the Texas part of the greater H/B play.

  93. 93
    zman Says:

    And SWN is in that area as well.

  94. 94
    zman Says:

    Sent those extra 10 unintentionally bought calls over the side, up 24%, good kind of mistake to make but too much exposure to keep. Now have the 5 May $105s and the 40 April $110s in the ZIM. Still have the 10 April $100s in the ZCAT taken yesterday.

  95. 95
    elijahwc Says:

    #91,92,93 Question Z: Isn’t GDP in the area?

  96. 96
    zman Says:

    Eli – yeah but I think mostly to the north, up in Harrison and Panola, this is Shelby, Nacodoches, San Augustine. Could be wrong, maybe they have more acreage down there too, need to check.

    EOG doing a very good job of showing people how to give an all day presentation.

  97. 97
    zman Says:

    EOG Horn River discussion starting

  98. 98
    bill Says:

    EOG WITH A GREAT PRESENTATION

    Like the idea of lng export

  99. 99
    bill Says:

    bossman 80

    Consensus good deal for sd
    good deal for ard if sd is over 8
    deal may not get done if sd falls below 7.50, imho

    Fantastic deal for both if ng recovers and oil holds

  100. 100
    zman Says:

    Boss – didn’t see the question. Good deal for SD, maybe a great deal. For ARD it’s a tougher call. Some of it makes sense but not with what they had previously stated was their goal of getting oilier. They are getting sued which is no surprise and it may not get shareholder approval.

  101. 101
    VTZ Says:

    Gold is breaking out above resistance now. Rally is on!

  102. 102
    bill Says:

    eog is everywhere with best of everything

    efs,haynesvill, canada, bahken, marcelus

    wouldnt they make a good target for a major??

  103. 103
    zman Says:

    BOP – re 43, EOG was the next one.

  104. 104
    BirdsofpreyRcool Says:

    ha! yep. EOG making a run for the border, as we speak.

    you ROCK, man!

  105. 105
    Nicky Says:

    Amazing – Greenspan points the finger at everyone else and takes no responsibility himself for the financial crisis.

  106. 106
    BirdsofpreyRcool Says:

    “Denial” — American Heritage Dictionary = 1) refusal to grant the truth of a statement or allegation; 2) refusal to accept or believe something; 3) an unconscious defense mechanism; 4) Alan Greenspan

  107. 107
    zman Says:

    re 104. Actually they are the ones that rock, I’m just a fan. Felt like the 2008 presentation but thanks.

  108. 108
    bloodystupidjohnson Says:

    For those who want to read a great book on the financial crisis read THE QUANTS by Scott Patterson. The book is written in the style of moneyballs. Not dry, easy for anyone to understand the ideas presented. The Big Short by Michael Lewis and Too Big Too Fail by Sorkin have gotten more press, but THE QUANTS does a better job of explaining a process that almost brought the system to a halt.

  109. 109
    elduque Says:

    So does the work that EOG has done on EFS and Niobrara, make CHK underpriced here?

  110. 110
    zman Says:

    ZTRADE – ZCAT – EOG

    Sold half (5) of the EOG April $100 calls taken yesterday for $5.00, up 209%.

  111. 111
    zman Says:

    Eld – don’t know the answer to that. It’s early in the Niobrara and EOG’s EFS is oilier than anyone else by acreage location, not sure it translates, definitely not a bad thing.

  112. 112
    zman Says:

    EOG summary stuff now

    CAGR for them through 2012
    Oil +50% / yr
    Gas +5% / yr

  113. 113
    zman Says:

    EOG risked reserve potential is now 52 Tcfe. They had proved reserves of 10.8 Tcfe at year end 2009.

  114. 114
    skimo Says:

    EOG acreage cost $1.6 bil current value (per them) $8 bil

  115. 115
    zman Says:

    BOP – any thoughts on the likelihood of a deal up for KOG, especially in light of yesterday’s acreage adds?

  116. 116
    zman Says:

    EOG – good slide in the wrap up materials (28/35) showing they have the best peak month rate wells in the Bakken. A little in your face to BEXP on that one.

  117. 117
    zman Says:

    EOG International discussion starting

    Trinidad, China, UK, New Ventures

  118. 118
    zman Says:

    EOG – China – I followed this when BR owned the acreage, could be big, will know mid year.

  119. 119
    zman Says:

    China

    Jiao 64-2H on a 71,000 acre closure, produces from some verticals but this is the first horizontal tight gas sand well drilled here.

    Overpressured Triassic sandstone

    fraced six stages, flowed back 3.5 mm/d, were disappointed, but redesigned remaining stages, well then flowed 14 mm/d, now very encouraged.

    Think this is a Tcfe type opportunity, will decision it by year end. This is the most data they have released yet.

    will drill 2 – 3 more HZ before year end

  120. 120
    BirdsofpreyRcool Says:

    KOG — z… i’ve been noodling about KOG doing a 2ndary to help fund the acreage acquisition. I gave it a pretty high probability of happening. The Chairman has been selling a few shares here… so I thought that meant they couldn’t be seriously contemplating a 2ndary. However, the sales seem to be through a 10b5-1 plan, so that doesn’t preclude the company from selling stock.

    Thoughts?

    The acreage add was great news. They have a 2nd rig now, so can put it to work generating cash flow immediately.

  121. 121
    zman Says:

    Favorite quote of the week:

    “the Welsh are kind of frugal with their vowels”

    EOG regarding one of their UK well names.

  122. 122
    zman Says:

    BOP – did they get their revolver redone yet? Thought they did not have it reworked by the time of the 4Q call. If so, I would think they could put it on there for awhile and not sweat as long as oil prices hold up. But at some point, it is smart to capitalize on the rally in the shares and get the float up so I think it is more than 50/50 he pops some shares off here. I don’t think his share sales will matter either.

  123. 123
    zman Says:

    And BOP, given how BEXP has RISEN following announcement of their secondary, I would think that the same may apply to KOG.

  124. 124
    bill Says:

    eog making points on non cash charges that i concur with

  125. 125
    zman Says:

    Bill – he may not like it but that’s the way the Street views it.

  126. 126
    zman Says:

    EOG – plan to sell $1 to $1.5 B of gas properties by mid 2011.

  127. 127
    zman Says:

    How did that Auction just go off?

  128. 128
    zman Says:

    re 127, mean the 10 year auction?

  129. 129
    zman Says:

    EOG – 15 minute break, then Q&A starts. Great presentation.

  130. 130
    Nicky Says:

    re 127 – they gave it an A

    BOP re 106 – lol!

  131. 131
    zman Says:

    Why are we still listening to Greenspan, see headlines scrolling across saying he is saying subprime loans not to blame for crisis.

  132. 132
    ram Says:

    BOP – What do you think is behind the reversal in CIGX with lots of volume?

  133. 133
    zman Says:

    EOG Q&A

    Gas Macro – they think supply is 2.5 Bcfgpd less than the EIA 914 data, which is much more than the 1% the EIA mentioned yesterday.

    Storage shows that supply / demand is 3 Bcfgpd tighter this past winter than the past winter.

    Market has not responded to that by the growth announcements of so many public companies.

  134. 134
    zman Says:

    EOG Q&A 2

    Definitely not bullish on gas by 2012.

  135. 135
    VTZ Says:

    Well EOG sure made me look like a dummy by not picking any up yesterday.

  136. 136
    elijahwc Says:

    PXP ramping?

  137. 137
    BirdsofpreyRcool Says:

    ram — #132 hot money players who don’t really know (or care) what is fundamentally going on here. Just “sell the news,” i guess. I bought a lot more, avg cost 2.77. So that tells you what i think.

  138. 138
    zman Says:

    EOG Q&A

    Capex for 2011/2012?

    Run rate for acreage adds is less going forward. $300 mm this year of the $5.1 B.

    Can’t give a number on the out years, but they will police their debt situation by not exceeding 25% net debt to cap. If they want to grow the oil side faster than they have outlined they would sell even more gas assets or do JVs. Not shares. Not debt.

  139. 139
    BirdsofpreyRcool Says:

    U.S. Treasury 9-Year 10-Month Notes Yield 3.9% at Auction
    2010-04-07 17:08:07.597 GMT

    By Kristy Scheuble
    April 7 (Bloomberg) — The U.S. Treasury Department sold
    $21 billion of 9 10/12-year notes at a yield of 3.9 percent, the highest since June 2009, as demand rose relative to the last auction of securities with the same maturity.
    The auction yield was lower than the 3.948 percent yield traders anticipated in a Bloomberg News survey before the auction.
    The bid/cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, was higher at 3.72, indicating stronger demand. At the Treasury’s last sale of the notes the ratio was 3.45.
    Indirect bidders, a group that includes foreign central banks, bought 43.1 percent of the amount sold, compared with
    35.1 percent in the prior auction. Primary dealers bought 40.6 percent, compared with 47.3 percent in the previous sale. Direct bidders purchased 16.3 percent.
    The yield on the notes sold today was the highest since the
    3.99 percent at the June auction, the Treasury said. At the previous auction, the notes yielded 3.735 percent. In when- issued trading before today’s sale, the notes drew yields ranging from 3.91 percent to 3.92 percent. In trading after today’s auction, the benchmark 10-year note yielded 3.90 percent.
    The Treasury sells all its bills, notes and bonds on a single-price basis. Notes are awarded at the highest yield needed to sell the securities.

    Auction Details

    At today’s auction, 99.62 percent of the bids that were filled came in at the high yield of 3.9 percent. The low yield submitted was 3.82 percent, the median yield was 3.874 percent, and the coupon rate was 3.625 percent. The price was 97.763192.
    Tenders totaled $78,076,074,700 and the Treasury accepted $21,000,258,700 of the bids. Competitive bids awarded totaled $20,897,524,100. Non-competitive bids awarded — including those sold directly to individual investors — totaled $102,734,600.
    For its own accounts, the Federal Reserve bid and was awarded $1,537,283,200.
    The notes will be dated Feb. 15, settle April 15 and mature Feb. 15, 2020. The CUSIP number on the notes will be 912828MP2.
    The minimum amount for Strips was $100.
    Strips stands for Separate Trading of Registered Interest and Principal of Securities. Coupons are separated from a note or bond and become a security. The remaining face value bond becomes another security that is known as a zero-coupon note or bond.

  140. 140
    VTZ Says:

    The direct bidders number is pretty high.

  141. 141
    zman Says:

    Thanks re bond stuff.

  142. 142
    BirdsofpreyRcool Says:

    so… why is PXP finally moving??

    LOS ANGELES—Several anti-drilling groups are expected to unveil a controversial agreement that they say will eventually end drilling off the coast of northern Santa Barbara County.

    In 2008, three respected Santa Barbara nonprofits signed a confidential agreement with Plains Exploration & Production Co.

    In exchange for promises that included eventually ending its local drilling operations, the groups agreed to lobby for the company’s proposal to expand drilling off Platform Irene.

    The terms of the agreement, however, remained confidential—a sticking point that ultimately killed the project during the public approval process.

    The groups now say they’ve revised and strengthened the agreement and plan to release the details to the public at a press conference in Santa Barbara on Wednesday.

  143. 143
    zman Says:

    EOG – thinks the Eagle Ford oil play will rival the Bakken, Alaska, and the deepwater GOM.

  144. 144
    ram Says:

    BOP Thanks. Bought more again.

  145. 145
    skimo Says:

    EOG Z, Merrill asked your sell international question. He likes the returns on international right now. He probably also likes the prestige of international and travel to those places-Ha

  146. 146
    1520sbroad Says:

    143 – Wow.

  147. 147
    zman Says:

    Skimo – re 145, yeah, heard that and his answer makes sense, he’s a ROCE guy through and through and that LNG gas in Trinidad is tied to contracts on methanol/ammonia and to oil prices.

  148. 148
    zman Says:

    Papa has cooled on W/ Europe due to challenging logistics. Hard to get access to acreage, etc. I recall EVG having this same issue with CBM efforts in Ireland.

  149. 149
    zman Says:

    EOG presentation over, stock at $104.60. Time for analysts to run back to the office and retool models tonight. Guessing we some upgraded targets in the morning.

  150. 150
    BossmanG Says:

    Z/bill, re:99/100, thanks!

  151. 151
    ram Says:

    ZMAN – Are you going to retool your model to verify the analysts?

  152. 152
    zman Says:

    I no longer model ones like EOG, beyond back of the envelope. Their NAV targets should move up significantly on the whole. CFPS less so as operating costs rise with their oilier nature.

  153. 153
    zman Says:

    Anyone hear yet if BEXP prices tonight?

  154. 154
    zman Says:

    Nice move on PXP Eli.

  155. 155
    Gtinvest Says:

    something is really happening with pxp. The average volume is 2.26 m current volume 6.83m

  156. 156
    zman Says:

    GT see 142

  157. 157
    BirdsofpreyRcool Says:

    Plains Exploration Announces California Offshore-Drilling Pact
    2010-04-07 18:53:02.218 GMT

    By Jim Polson
    April 7 (Bloomberg) — Plains Exploration & Production Co.
    announced a California offshore-drilling pact in which the company agreed to assure land donation in exchange for drilling.
    The announcement was made on the T-Ridge Project’s Web site
    http://www.t-ridgefacts.com/2010/04/07/environmental-coalition-
    and-pxp-release-revised-t-ridge-agreement/.
    The pact requires state approval, Plains said.

  158. 158
    zman Says:

    Nicky – S&P breaking your levels.

  159. 159
    rseidman Says:

    Quick drop in EXXI.

  160. 160
    Nicky Says:

    Z – it went a little higher on the bounce than I expected. I thought 1188 would contain it. 1174/75 is very important.

  161. 161
    zman Says:

    re 159, just looks like market, not stock specific.

  162. 162
    rseidman Says:

    re 161, I see that now. Hasty comment on my part.

  163. 163
    tomdavis12 Says:

    Z: Cautious comments from Ben and Fed official Hoenig given as reason for weakness.

  164. 164
    zman Says:

    No biggie, I was just saying. Never can tell who’s just watching one or the whole group.

  165. 165
    BirdsofpreyRcool Says:

    Mrkt dropped on news that consumer credit shrank $11.5B in February… this was a lot more than expected.

    Big whoop.

  166. 166
    BirdsofpreyRcool Says:

    I see the GDP 5s of 29 are back above 91. Thanks to Elijah, i pick up some bonds last week around 87. They are convertible and puttable at par in 2014. Seemed like a nice place to park for a while. Thanks again, Elijah!

  167. 167
    zman Says:

    Got this from RJ on EOG pre call (which I think is lame compared to mine but I’m probably biased). Note the rating.

    “EOG Resources (EOG/$97.38/Market Perform) analyst day highlights. In the heavily hyped Niobrara Play, EOG’s Jake 2-01H produced at 555 Bbls/d for its first 90 days, but will be tested further before moving into development mode. In the Eagle Ford, EOG now has 505,000 net acres and reserve potential of 900 MMboe, and has drilled 16 delineation wells. EOG also announced that it plans to divest $1.0-1.5 billion in North American gas assets in 2010/early 2011, which along with a $1 billion credit line and our projected $2.8 billion in operating cash flow, should narrow (but not fully close) the gap in funding the 2010 cap ex budget of $5.1 billion (vs. our $3.5 billion estimate). Growth of 13% in 2010 was reaffirmed and EOG introduced a 2011 rate of 19%, both in-line with our model. Reserve potential went from 6 Tcf to 9 Tcf net in the Horn River Basin, and from 3-4 Tcf to 10 Tcf net in the Haynesville/Bossier. Bottom line: We like EOG’s increased oil exposure vis-à-vis the Niobrara and Eagle Ford, and shedding non-core gas assets to fund cap ex is a no-brainer.”

    My RJ guy tells me the analysts have yet to comment to the troops during or following the call. Also lame but maybe an upgrade in the morning.

  168. 168
    zman Says:

    SWN falling back like the unhedged gassy name it is when one of the biggest gas bulls of all time has given up the cause. RRC, UPL others doing much the same.

  169. 169
    zman Says:

    BEXP interesting to see it hold up despite oil, the market, and a secondary. Numbers going up there up deal closure.

  170. 170
    Dman Says:

    Z – can you clarify #168? Which bull?

  171. 171
    elijahwc Says:

    Thank s BOP. My GDPANs are printing 38.50 today. As long as GDP fails to out of business its a nice payday.

  172. 172
    zman Says:

    Mark Papa, CEO EOG

    “Definitely not bullish on gas by 2012. We are not long term gas bulls”

  173. 173
    elijahwc Says:

    BEXP – C K Cooper out in front of the offering.

    Reiterate Buy – Price Target: $23 from $20
    Stock Deal Drives Growth
    Brigham Exploration announced an offering of 13MM shares of
    common stock to fund the acceleration of Bakken/Three Forks (3F)
    development in its core areas of the Williston Basin, dubbed
    “Rough Rider” and “Easy Rider”, where it holds 161,900 net acres.
    The company plans to increase the number of operated rigs from
    four to eight by May, 2011, drilling 33.1 net wells in 2010 and 44.6
    net wells in 2011. We expect the infusion of equity to be a
    significant driver of production, earnings, cash flow and reserve
    growth. The combined increase in production and higher oil price
    deck results in an increase in EPS/CFPS from $0.25/$0.81 to
    $0.42/$1.12 in 2010 and from $0.37/$1.10 to $0.82/$2.03 in 2011.
    We have increased NAV/Share from $18.17 to $26.04, reflecting an
    increase of about $5.00 for the higher price deck and an increase
    of about $3.00 for the accretive effects of an accelerated drilling
    program.
    •••• After adjusting for the new well program, our production estimates
    increase from 7,200 BOEPD to 8,716 BOEPD in 2010 and from
    9,134 BOEPD to 14,298 BOEPD in 2011. We note that our
    production estimates are preliminary, not based on company
    guidance, and may vary with the timing of when new wells are
    brought on production. Additionally, we have increased our oil
    price deck from $70/Bbl to $80/Bbl to reflect our more bullish view
    on oil. By implementing a more aggressive drilling schedule, we
    estimate BEXP’s new plan shortens the time to develop unbooked
    prospective Bakken/3F well inventory in its core area from 12 years
    to 8 years, reducing the time-value discount from 44% to 35% and
    enhancing NAV.
    •••• We reiterate our BUY of BEXP and increase our price target from
    $20 to $23, reflecting an increase to NAV from the acceleration of
    drilling. BEXP is the leading operator on the western part of the
    Williston Basin Bakken play. As cited in previous research reports,
    the acceleration of drilling was just one of several meaningful
    positive catalysts for BEXP shares in 2010. Additionally in 2010,
    the company plans to drill wells to test the potential for infill and
    3F development at Rough Rider. During the first half of the year,
    BEXP is also scheduled to drill a Bakken well in Montana, where
    the company holds 82,000 prospective acres.

  174. 174
    elijahwc Says:

    Methinks BEXP does just as excellent a job of managing their bankers as they do PR. And drilling.

  175. 175
    Dman Says:

    #172 Thanks Z

    For those interested, a gap filled today in POT from early March.

  176. 176
    elijahwc Says:

    In my experience POT has caused a lot of gaps

  177. 177
    john11 Says:

    In memory?

  178. 178
    john11 Says:

    Sorry eli..couldn’t help myself.

  179. 179
    BirdsofpreyRcool Says:

    john11 — elijah’s statement just begged for it… lol

  180. 180
    elijahwc Says:

    john11 – remind me, what are begging forgiveness for?

  181. 181
    Dman Says:

    In #175 I was going to ask “Can someone remind me who is the local POT guru here?”

    But I thought better of it.

  182. 182
    zman Says:

    Thanks Eli – CK was way behind on 2011 numbers, now they are slightly ahead of the Street.

  183. 183
    zman Says:

    WHX new 18 month closing high today, should be about a month out from their next distribution announcement.

    beerthirty

  184. 184
    zman Says:

    EOG looks like a pretty clear break out here and on strong volume from today, will be interesting to see the revisions to numbers tomorrow through Monday.

  185. 185
    skimo Says:

    Z, BOP and board, just thought I’d say THANKS to y’all for a great 2010 so far. This board is great for both ideas on stocks and for helping me improve my general investing analytics(not hard to do given my starting point). I appreciate all of you, especially Z and BOP!!!

  186. 186
    zman Says:

    Thanks Skimo, nice of you, glad to be a help.

  187. 187
    BirdsofpreyRcool Says:

    skimo — wow. That is so nice of you. Thank you.

    Personally, i think the 2010 Award For Best Bang For Your Buck (so far) goes to z for that SSN trade i’m still crying about missing. That one was WoW-sters.

  188. 188
    reefguy Says:

    I like IPI better than POT

  189. 189
    occam Says:

    Will the BEXP financing mean less wells with USEG going forward?

  190. 190
    zman Says:

    Occam – Good question, don’t have a good answer. At last check, they were saying USEG are good partners, that they were not looking to ditch them. But they certainly need them less now.

  191. 191
    zman Says:

    BEXP priced 14 mm share deal at $18. That’s 1 mm larger than expected … good demand.

  192. 192
    Patipati Says:

    Z, your SSN trade was sensational!

    But there was another excellent one: TGA, June and September options.

    I cannot remember who brought that to the board.

  193. 193
    BirdsofpreyRcool Says:

    This guy does a good job of laying out the argument of why I thought the CIGX news was so compelling. I think sellers definitely “got it wrong” today.

    http://seekingalpha.com/instablog/121-james-altucher/62309-did-cigx-just-find-a-cure-for-alzheimer-s-disease

  194. 194
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    Cruise Control Off.

    It is fairly remarkable to note that today’s 59 basis point sell off was the largest down day since late February. In addition, volume picked up and exhibited signs of life. Volume on down days tends to be 15%-20% heavier than up days, so today’s 15% increase from the 20 day average was not atypical. The trading action today was interesting due to the equity market’s varying sensitivity to different catalysts. The Greek credit situation has resumed its deterioration over the past week and a half, but it is not detectable unless you are looking specifically at Greek yields and spreads. This morning, U.S. equities followed Crude lower after the inventory report. We are at the point in the cycle where lower Crude prices are positive, not a negative. Both equities and Crude rebounded. When selling as much debt as the U.S. is selling, it is a positive to see higher yields attract numerous buyers. As such, it is hard to see a downside to the strong 10 Year Treasury auction with the highest bid to cover in at least 16 years. Yields were pushed back to levels where they broke out after the March employment report. The market traded to its lows following the Fed speeches, but rebounded into the close. The odd nature of the action may be reflective of jitters manifesting or investors squaring themselves away before earnings season.

    FedSpeak.

    This afternoon, FedSpeak was what initiated the larger moves of the day. Chairman Bernanke continues to sound very dovish and today, he tied the nation’s fiscal imbalances and deficit problems into his speech. “The arithmetic is, unfortunately, quite clear. To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above. These choices are difficult, and it always seems easier to put them off–until the day they cannot be put off any more.” To us, that sounds like the Chairman foreshadowing a possible continuance of easy policy in order to help Americans endure the adjustment when the fiscal bill comes due in the near future and taxes go up. This could also explain the heightened level of dovishness emanating from the Fed as the recovery unfolds. On the flip side is Kansas City Fed President Thomas “The Hawk” Hoenig asserting that the Fed should “initiate the process” of raising the Fed Funds rate to 1% “sometime soon”. Hoenig’s rationale was that “Small reversals in rates would leave policy highly accommodative and supportive of our economy’s recovery but would put more weight on mitigating the risk of longer-run financial imbalances.” The irony of that statement is that 1% was the trough level at which the Greenspan Fed kept rates in 2003-2004, fueling the housing bubble and imbalances that created this mess (coincidently Greenspan denied this again today). Hoenig is correct that 1% is still very accommodative (it fueled the housing bubble), and there will likely be a point in 2010 where the market and economy could handle such a move, it is just not now with a 9.7% unemployment rate. If prepared, market participants would prefer a continued “normalization” in one shot hike to 1% in late 2010 if they think the Fed will be on hold again for some time. Although Hawk Hoenig might like such an idea, and we might like such an idea, it is highly doubtful that Big Ben likes such an idea.

    It’s all Greek to me.

    Returning to the Greek situation, nobody ever believed the problem was solved, especially when Germany opted to lean on the IMF. Despite the lack of a real solution, the markets did allow spreads to contract in March. This recent blowout has been a non-event in U.S. equity markets. Even more surprising, it has also been a non-event in the French and German equity markets. German and French stock markets continue to hover near 52 week highs, yet they house the share of the banking systems that have the most exposure and the most to lose. We have asserted and continue to maintain that the EU leadership could find a solution if they had the will, they apparently don’t and incompetence has aggravated the situation. We also know better than to have much faith in elected officials fixing problems – the current scenario is the case in point. What we do know is that the divergence between the weakness in Greek bonds and the strength of French and German equities (especially bank shares) needs to be resolved. The obvious interpretation is if German and French shares roll over, then the problem is accelerating and vice versa if Greek yields collapse. It might take a little market shock to motivate European politicians to find a real solution.

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