Market Sentiment Watch: Market may be sensing we are due for a pause and we don't get a lot in the way of economic data in the first half of the week to support a move higher so all eyes will be on earnings, then maybe Goldman vs the SEC and the broader implications this may have for banks both in the U.S. and abroad, and then Greece (yeah, it's still an issue). This morning we got our first shot of E&P, Coal, and Oil Service earnings this morning with MMR, ACI, and HAL reporting 1Q results. The onslaught of E&P earnings don't hit until closer to month end (see this week's earnings calendar in the Stuff section below (also cataloged on the Calendar tab)) but we will get more oil service, driller and coal earnings as this week moves along providing plenty of opportunities for the ZIM to buy (or sell) the news. For those of you who forget, the ZIM plays news or events after the fact. The ZCAT plays before hand trying to scoop the Catalyst List. The ZIM starts this period 100% in cash which will generally be the case at it plays "hit and run" with the news. The ZCAT begins this period in only four E&P names with 53% held in cash. After the move the market has had cash in the ZCAT will probably run on the high side of normal until the E&P names look like their news and fundamentals have caught up with their moves.
The Week Ahead:
- Monday 4/19: Leading indicators at 10 am EST (F= 1.3%, last read 0.1%)
- Tuesday 4/20: No ecodata
- Wednesday 4/21: EIA Oil Inventory Report, no ecodata
- Thursday 4/22: EIA Natural Storage Report, jobless claims (F=458K, PPI (F= 0.3%, core F= 0.1%), existing home sales (F=5.28 mm)
- Friday 4/23: durable goods (F= 0.2%, last read 0.9%), new home sales (F=330K, last read 308K)
In Today's Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today - MMR, ACI, HAL earnings, Energy Week 1 Calendar, Subscriber mailbag, SSN update.
- Odds & Ends
Holdings Watch:
ZCAT (Zman Catalyst portfolio, formerly the $10KP II):
- $11,250
- 54% Cash
- Positions are updated on the ZCAT, ZIM, ZLT page.
ZIM (Zman Inefficient Markets portfolio)
- $18,800
- 100% Cash (No positions)
- Positions are updated on the ZCAT, ZIM, ZLT page.
Commodity Watch:
Crude oil eased 2% last week to close at $83.24 and would have been flat if not for the market's Friday tumble. The crude chart looks like this. The 12 month crude strip is now trading at $87.81. The June contract takes over as the prompt month contract tomorrow and is currently trading at $82.40. This morning crude is trading off $2+ on weak equity futures, a strong dollar and the volatility that surrounds the few days approaching contract expiration.
Natural gas closed down 1% last week at $4.04. The 12 month strip is now trading at $4.47 and the U.S. E&P industry continues to ramp the active rig count. This morning gas is trading up slightly.
Stuff We Care About Today
MMR Reports 1Q10 Earnings; Nothing Solid on Exploration; Trims Guidance Again
The 1Q10 Numbers:
- Production: 190 MMcfepd, this was preannounced as weaker than prior guidance.
- Revenue of $132.5 mm vs $128 mm expected
- EPS of ($0.74 including impairment) vs ($0.10) expected
Highlights:
- Ultra Deep Gas:
- Davy Jones:
- Flow test now expected in 12 to 18 months - this is longer than I thought by as much as 6 months.
- The offset well commenced drilling April 7, 2/5 miles SW of the discovery well - expect that to take several months to reach TD.
- Blackbeard East. Commenced drilling early March, at 11,000 feet towards a planned total depth of 29,950 feet.
- Lafitte prospect to commence sometime in 2010.
- Davy Jones:
- Deep Gas:
- Blueberry Hill appraisal well - No good results here yet as the well failed to confirm continuity of the sands seen in the discovery well but at a shallower depth. Going back to 19,000 and sidetracking to 24,000' next.
- Hurricane Deep sidetrack well planned for 2010 following problems at the well disclosed on a PXP call.
- Boudin and Platt prospects to drill later this year.
- Blueberry Hill appraisal well - No good results here yet as the well failed to confirm continuity of the sands seen in the discovery well but at a shallower depth. Going back to 19,000 and sidetracking to 24,000' next.
- Cash balance stands at $268 mm up from $241 mm at year end.
Guidance:
- Sees 2Q10 and 2010 average volumes at 170 MMcfepd; below prior guidance of 180 MMcfepd.
Nutshell: Hard to be happy with this quarter. Blueberry Hill results did not confirm the size of the structure and the company took an impairment due to low gas prices but attributed to this this structure. There was nothing in the press release in the way of further color on Davy Jones although there is sure to be more on the conference call. Lower guidance is also almost never a crowd pleaser. If it gets slammed today I may add some but at the moment I do not own the stock or options here.
Conference Call: today, 10 am EST.
ACI Reports 1Q Results; Strong Sector Outlook Gets Stronger
The 1Q10 Numbers:
- Revenue of $711.9 mm vs $725 mm expected
- EPS of ($0.01) vs $0.075 expected
Highlights:
- Raising earnings guidance for 2010.
- Upping met coal production.
- Expects coal markets to continue to strengthen throughout 2010.
- Sees regulation further reducing Central Appalachian coal production
- Global steel sector remains strong
Conference Call: today, 11 am EST.
HAL Reports OK 1Q10 Numbers
The 1Q10 Numbers:
- Revenue of $3.8 B vs $3.762 B expected
- EPS of $0.28 (ex items) vs $0.25 expected
Highlights:
- Revenue was up 19% in NAM, operating income more than doubled due to higher activity. "Significant absorption of the industry's excess service capacity".
- “Latin America posted disappointing results in the first quarter" - due to declining activity in Mexico.
- On the outlook: “Tangible indications are that, barring any major economic disruption, the industry is likely to experience a steady resurgence in international activity in the second half of the year and into 2011."
Nutshell: Better than expected quarter as the Venezuela devaluation that cause me to write "ex items" was disclosed early in the quarter. Their outlook for the international side continues to improve despite some weakness in this just past quarter and it will be interesting to hear their comments regarding NAM for the second half as most industry watchers expect a slowing of the recovery in activity due to weak natural gas prices. The Latin American comment above may spook people here and at SLB. It definitely should spook NBR and WFT investors. Conference call tone will be important although looking at the futures maybe not today. I continue to think either these guys or SLB acquire CLB soon. I don't own HAL or HAL options at this time.
Conference Call: today, 9 am EST.
Subscriber Mailbag:
KWK - JB on the fundamental desirability of an option trade in KWK as he sees a good entry point on the chart this week:
KWK tied to natural gas prices at the hip and earnings are not until May 10 so I would not expect any catalytic news out of the name prior to that that would move it in a direction opposite of natural gas. As to natural gas, that should continue to be range bound although we may see a bit of a bullish move toward the end of the month with the EIA revision of supply.
Is Oasis Petroleum worth watching?
Yes, depending on the valuation when it comes public I am likely to play this one in the ZLT. Good acreage position and no debt will make this a welcome name to the short list of players available now in the Bakken. See the S1 here.
Mimster Questions From Friday Afternoon:
A few questions…
1. How “oily” is KOG?
2. KWK vs HK. zman, what are your thoughts on these 2 going forward a year or 2?
3. Why are MLPs so higlhy valued at the moment?
Answers:
- KOG is almost entirely oil, with 97% of 4Q production coming from Bakken barrels. They'll add some gas to the mix later this year as takeaway capacity is added but this will remain an oily name.
- KWK vs HK. I think they both will be tied to the fate of natural gas although both have made recent moves to get a little of the CF multiple bump some of their peers are getting from the market's liking for oilier production. HK is the gassier of the two (97% vs 75%) and KWK has more liquids rich gas but HK is making an effort in the Eagle Ford shale to focus on the oil window and if that takes off you could see the stock take on a more upward sloping angle. I think over the next two years both outperform some of their drier gas peers. KWK has the wild card of having Montana Bakken acreage and if ROSE and NFX come up with good discoveries there it could mean KWK catches a little of that wave. HK is honestly the less likely of the two to dilute shareholders at this point having monetized more than they promised and having promised to not tap the equity markets again through 2011 so it does have that going for it. I hold HK common as well as calls at the moment so that's probably the best indicator of which of the two I think performs better over the near and longer term time frames.
- MLP valuations high - are they? Their yields are lower than they have been in some time but if you look at TEV /EBTIDA of upstream MLPs vs the average non MLP E&P I see them as pretty similar.
SSN Announces Big Rate From Gene Well
- Last week brought disappointing news from the company's Bakken test when production did not increase from the initial rate following the completion of the frac on this well.
- The initial rate here was 1,112 BOEpd (5 of 16 stages complete) and the week later rate was 1,027 BOEpd (all stages completed).
- Last night SSN announced that following clean up and after a workover to remove a sand plug the production rate moved up to 2,936 BOEpd (2,406 Bopd and 3,180 Mscfpd). Should move the stock back towards and possibly above the recent highs tomorrow.
- This is also likely favorable for AEZ and BEXP who have acreage nearby.
I'll have a new Catalyst List Update in tomorrow's post.
Other Stuff:
- CLNE on the tape expanding their NYC CNG service with two new stations to service the taxi, limo, and paratransit fleets. Barron's is also out with a piece calling for the stock's demise again.
Odds & Ends
Analyst Watch:
- UBS cuts CLR to Neutral
- PXD - target bumped $7 to $69 at Goldman, rating stays Neutral
- FST bumped to Buy at Goldman, adds name to Conviction Buy List, bumps target $1 to $34.
SSN bid at a buck.
SSN = huge call!! wowow. Nicely played.
MMR = not a lot to get Happy about in the PR. An awful lot left UNsaid + lowered production guidance…. not going to be a pretty open. Maybe hear some Happy Talk on conf call… but maybe not that much more to say right now. Offset wells spud means they think ultra-deeps productive, but still not enough to sink your teeth in (and come up with a reserve base).
I bought some MMR on expectations of additional info from DJ (and maybe BBHill)… but hold EXXI for the same exposure plus better production outlook. Lesson here = don’t deviate from the Main Course… I liked EXXI, MMR was just a side-dish. Side dish gonna Eat My Lunch today. ugh.
Thanks BOP, I may play MMR if it gets hit hard.
HAL call starting.
GMXR on the tape with some well news.
HAL Notes – absorption of NAM service capacity most evident in stimulation … good comment for BHI.
Zman, thanks for the KWK comments…
HAL notes:
Shale drilling now accounts for 35% of all drilling in the U.S.
Horizontal drilling is now 20% above the past peak.
This demand is allowing them to up prices.
JB – lemme know if you have any follow ups / clarifications on that.
HAL Notes:
gas prices may disrupt the rebound in drilling, risk of gas price depression over the next several quarters. (duh).
JB – FST may be one of the few bright spots today on that GS upgrade. They have put out quite a bit of good news and have tread water through all of it near the current level. Wondering what you think of the chart as GS must be seeing something on the plus side as we approach earnings here (maybe more big wells out of the Granite Wash, maybe something else).
HAL Notes:
See modestly improved NAM margins in 2Q even if rig count flattens.
HAL nutshell – improvement in international expected, improved NAM despite slowdown there. Call still ongoing, but getting into minutia, waiting on Q&A to start.
Jat, any thoughts here? Sounds pretty favorable to me, stock has been range bound by worries over NAM.
Got this from Jat in an email:
Q2 consensus definitely too low.
NAM incrementals even better than I expected, international basically in line. Most buy siders were looking for a 1-2 cent beat so this is good. Have to watch the Lat Am situation but everything else shaping up nicely.
We got back into HAL in early December and have only been buying on dips, we are a longer term holder here and I don’t see any reason to change that.
The Goldman effect on the market may provide an opportunity to enter HAL below Friday’s close, mulling, will look at calls when they open, perhaps the $31s or $32s. Q&A starting now.
HAL Q&A
NAM rig question. Gas rig count drops from here and oil rig count offsets?
Had thought rig count would be range bound. Have been surprised by the shift to liquids shift. They now see negative pressure on dry gas, but tempered by hedge positions and the need to drill to hold land. So still see range bound rig count.
ZTRADE – ZIM – HAL
HAL – Added (10) HAL May $32 Calls with the stock at $31.50 for $1.05. Likely to add a second set on market related weakness today. Call going well, see notes in post and in comments today.
ZTRADE – ZIM – HAL
HAL – Added (20) HAL May $33 Calls with the stock at $31.60 for $0.67.
Knock, knock … this thing on?
Z: E&P Analyst @ MS came out with a 59 page report last Thurs 4/16. “Headwinds for NG Stocks”. Main points: 1: Look for revisions to 2010e EPS as Q1 earnings season gets underway, we see ~20% downside to EPS at the current strip for gas stocks. Robust oil prices and the ongoing US industrial recovery temper this view. 2: Look for signs of discipline from the upstream. With ~60% of our coverage unable to organically fund activity at the current strip, look for activity to fall during Q2. While likely a constructive sign for commodity fundamentals, this does imply lower growth for the stocks. 3: Deal flow likely continues. With funding a challenge, and the risk of a prolonged period of sub-$5/mmbtu NG, producers are looking for options. Asset sales, capital raises, and JVs are all viable alternatives. The envoirnment benefits those with financial flexibility.
Z: S&P stock of the week. NE ( talking my book again). Target $58.
Tom – re points in #16:
1) agreed, just from marking estimates to market. I think 2 weeks back I put up a bar graph of Street estimates for NG vs the forward strip and the Street was just over 20% high to those levels…so numbers have to come down.
2) discipline – maybe a little but not a lot. They have their hedges and they have their land to secure via drilling. HAL is not looking for a big decline. They are looking for more flattish activity and I would suggest they have a better window into what’s happening than MS does. Agreed via the last points of JVs, asset sales, etc, but for the most part, this just means that programs will fall less than they would in a less functional deal environment. So I don’t see volumes taking a big hit here.
Tom – I put it on the calendar just for you.
Z: I will be on CC and will give my report, but please no comments I am going for the record and Z you don’t count.
SSN traded over 2 mm shares so far. Average volume is closer to 1.5 mm.
Global Hunter sec on MHR tgt raise,
Event: First Eagle Ford Shale drilling in 30 days; Raising price
target and publishing 2011 estimates.
Summary: Magnum Hunter Resources (MHR) plans to spud its first Eagle Ford
Shale well on May 20th. The company plans on drilling three wells back to back
targeting the “oil window” of the Eagle Ford Shale. Recent industry
announcements regarding this area are converting concept to reality. MHR began
amassing acreage early in the play and now has up to 50MM barrels of oil exposure
on its acreage. We are therefore reiterating our Buy rating and raising our price
target from $3.50 to $6.00 per share.
HAL inching higher as the call progresses, I think this one carries higher post call and probably tomorrow on this. The idea that NAM is not as much of a worry in the second half of the year as previously thought is kind of a big deal. HAL tapping on $32.
HAL call over.
MMR call about to start, stock off 5.6%.
jim bob time
MMR, McMoRan Exploration, 10:00EST, 888-647-2712, Code: 66839553, webcast
Bill – MMR slides are up on their site now, perusing.
Leading indicators up 1.4%, more than the expected 1.3% gain.
MMR call starting.
HAL cruising higher.
MMR slides – nothing new on Davy
MMR slides:
Those two deep gas prospects mentioned in the post are 300 Bcfe and 150 Bcfe gross respectively, not huge, not small. Net revenue interest at each are unannounced and 36%.
I don’t see anything in the slides to perk up the stock today and I don’t think they have any near term catalysts at this point.
Morning all. So far we only have 3 waves down from the high. We need to take out Friday’s low to see five down. If the 1185/87 area fails then we are looking at 1177/75. Resistance is at 1200/1203. Back shortly with a couple of possibilities for the count.
ACI in the green on their quarter, hard to get all that excited on the coals at this point given the run they have had.
Not hearing anything on the MMR call yet that would lift it but Jim Bob has not spoken yet.
Thanks much Nicky.
Mimster – did I answer all your questions in the post?
#8 FST…has a nice continuation type triangle pattern on both the daily and weekly charts…it’s pressing against long term weekly resistance today…trade above $28 would break out above 100 period weekly resistance…thinking a pullback near $26 would be ideal…from here, FST holds the P&F buy signal untal a $23 print…
Thanks JB, very helpful, will be watching going into earnings soon there.
Here’s one I would put on the plausable list.
“Live In Play
19-Apr-10
10:14 GDP Goodrich Petroleum pops to HoD as CHK for GDP makes the rounds “
Anything interesting on the horizon re CHK? I’m holding for now but must admit dollars could be better allocated at this time.
FST charts posted…
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
Cargo – re CHK – more color on their oil plays in 1Q call, maybe they transition more rigs to oil drilling.
Jim Bob’s comments didn’t really clear much up for me on MMR, stock falling further now. I think long term they are fine, but bad day today. Maybe a buying op, but Q&A just starting.
Consider me a contrary indicator. If I’m ready to bail then it’s about to move.
MMR – on Davy Jones – heat will not be an issue for the metal in terms of producing the well. There are rumors that it will melt metal but that is not true.
Cargo – of course that doesn’t mean CHK is set to rise soon, no matter what they are a gas company.
re 38, why would CHK buy GDP? what assets does GDP have that CHK isn’t already JVed with?
I mean it would certainly help out your GDP bonds, but I don’t get the transaction.
Tempted to take puts on MMR.
… because this is the kind of conference call that will lead analysts to call it dead money for quite some time.
Thanks for finishing your thoughts on MMR. “Dead money” is such a nasty phrase.
ZTRADE – ZIM – MMR
Added (25) PUTS, May $12.50 PUTS for $0.40 (on the mid) with the stock at $14.10, down about 8% today following earnings. See site for more details on the quarter. Listening to the call now and thinking analysts will come away with a lack of near term catalysts for the name. Couple that with slightly lower production guidance I can see analysts taking numbers lower and calling the stock “dead money”. Taking a look at the daily chart it looks vulnerable to me. I still like the name and concept longer term but I think it may take a bigger hit here.
Ram – yeah, I agree.
MMR could fill the gap at $9, fer sure.
Dman – I’m no chartist as you know and my record on the put side is not good. But that’s kind of what I am thinking.
Jim Bob not giving anyone anything on this call to smile about … at least not near term. If you are a two year holder you could care less about much of this.
He just said the flare shown by EXXI may or may not matter. Can’t tell yet if it was meaningful.
I’m skipping the ACI call and sticking with the MMR call. ACI has completely sold off its early gain. I think that coal group is tired.
MMR – the 200 day is around $10.40, and the stock is breaking the lower bolly band now at $13.75. It bounced off that 50 day sma like a shot on Thursday and Friday.
EXXI…approaching 20/50 daily SMA and major trendline support…could bounce here
Been on a coupla calls this am… incl MMR now. I think MMR goes lower… no reason to buy it here. JimBob not doing a good job reducing uncertainty and laying out any time lines that scream “short-term.”
Will continue to hold EXXI as I think current operations underpin the value here. MMR is facing declining near-term production and uncertain time-lines on their Ultra-Deeps. “Dead money” means the stock could do just about anything here. Only positive catalyst out there would be the announcement of a deep-pocket partner. But, unless JimBob is desperate, there is no reason to sell down until they can flow-test DJ. Selling down before that would leave $$s on the table… unless DJ is not all that it has been claimed to be. But there are enough non-MMR partners in that well that I think we would know if JimBob was spinning Tall Tales at DJ.
JB – I agree and was just about to comment on it. The reaction there does not make sense. There is nothing on this MMR call or slides or press release to indicate anything bad for Davy Jones. Just a little longer to a flow test but the real news there is that they confirmed the liner is set, we heard it but its good to hear them confirm it. EXXI very different animal than MMR and the market should ferret that out shortly.
Re 56. Absolutely agree. I think the EXXI is a very different and better, less risky, story at this point.
WHX continues to inch higher.
MMR call – Gramercy Capital comment about having gas stuck in the ground at a time of low prices is a laugh riot. Man that Joan is funny. Sharp too.
JimBob doing a good job of tatooing the words “Dead Money” on his forehead this morning.
BOP – maybe he wants to buy his stock lower.
That would be a good explanation.
HAL given up all gains on the day. I was tempted to day trade those calls for a mid 30% gain and probably should have but don’t feel that the pullback in the shares has anything to do with the company and has everything to do with the market.
BOP – he’s getting a bit defensive, never good on a call.
MMR call over. Stock at $13.72. Feels like lower is in order.
Yep. File that MMR call under “Things That Suck on a Monday Morning.”
z — did you hear him slam the phone down at the end? yikes.
#56, 57,58
Against that, I’d guess that if MMR plunges to $9 there will be some drag on EXXI until MMR stabilises.
Rightly or wrongly, there will be some uncertainty and unless crude resumes an upward trend, I’d expect the focus to be on risk. There is still a bit of profit in EXXI that people can take.
It does depend on what sort of holders are currently in EXXI and how well they know it.
Wonder if JimBob will pull a Bob Simpson and faint into the arms of a suitor.
Dman — i never, ever argue with people taking profit and reducing uncertainty in their lives. If you book it, it doesn’t dissolve in front of your eyes.
67 – No kidding.
68 – Yes, he often calls in from another location and that was definitely his drop without further closing comments. Can’t blame him. The folks on the call were generally impatient, “what have you done for me lately” types. Like most people.
re 69 – actually quite a lot of profit people could take. Or they can shift the balance away from MMR and more heavily towards the safer domain of EXXI.
BOP – I really, really doubt he sells the company without a big, big premium.
Big blocks of selling going off now.
Wunderlich commenting on MHR this am:
“Raising our Price Target as Activity and Acreage Position Increases
We are raising our price target on Magnum Hunter Resources (MHR) to $6.00 per share from $4.00 and maintaining our Buy rating based on the company’s acquisition of additional acreage as well as higher acreage prices in the Eagle Ford and Marcellus regions. These increased positions and higher prices drive our NAV calculation higher. We look for Magnum Hunter to continue adding acreage in the Eagle Ford to expand its footprint while also beginning to drill in the area starting in May, which could unlock significant additional value. Additionally, Magnum Hunter should see its Marcellus assets increase in value with the completion of its pipeline and drilling activity this year.
Key Points
Magnum Hunter’s Eagle Ford position is growing nicely. The company has been able to expand its Eagle Ford acreage to over 20,000 acres and is expected to increase further in the near future. We believe the company’s strategy to build a strong foothold in the area before drilling should allow Magnum Hunter to acquire acreage at lower prices. We have recently heard of Eagle Ford acreage going for $4,500-$5,000 per acre, substantially higher prices than just a few months ago.
Drilling activity is set to begin in South Texas in May. The company has contracted a drilling rig and intends to drill three wells consecutively beginning next month. We expect Magnum Hunter to have strong results from these wells, given the proximity of the company to multiple Eagle Ford successes, and we believe once the company can show production from the region, its value should increase substantially.
Magnum Hunter’s Marcellus pipeline should be a significant asset. The company is currently finishing its pipeline system acquired in the Triad deal to provide the necessary infrastructure to transport natural gas from its West Virginia assets. The pipeline can move up to 200 Mmcf/d of high pressure gas when completed, which should also allow Magnum Hunter to generate additional revenues by transporting third-party gas. Finally, the company should also generate nice additional revenues from its other service equipment in Appalachia.
Drilling in the Marcellus should begin in the next few months. The pipeline is expected to be finished around 3Q10 and then Magnum Hunter intends to drill multiple wells targeting the Marcellus shale. We believe the pipeline and initial drilling results should increase the value of this play significantly during 2010.
Production is up nicely so far in 2010 and set to ramp further. The company has been able to ramp production to 1,800 boe/d after the Triad acquisition; a significant increase from the 700 boe/d average in 2009. We look for production to grow further throughout 2010 and exit the year over producing over 2,100 boe/d. Further, Magnum Hunter’s production is 67% oil, which generates nice additional revenues. …”
ZTRADE – ZIM – HAL
HAL – Added another set of (20) HAL May $33 Calls with the stock at $31.65 for $0.65.
Anyone see any news on WHX, up 1.4% in this market seems odd.
Z: Why we are long commodities. Last week the blast from the WV coal mine of MEE caused the price of metallurgical coal to spike 22%. What this tells us is not enough money has been invested in finding more supplies of many commodities. Unfortuneatly the E&P space many be in the penalty box for some time but this too shall pass. As of Friday I am showing the index performance of refining +11 YTD, Oil Service +8.6, S&P 6.9, E&P 4.5, Integrated +2.9. My conclusion is that without Z the E&P space may be a little bumpy. He can still make money is my bet.
Thanks Tom, I like to thinks that’s true, lol.
SSN trading sideways at $0.83 and I’m still holding in the ZLT having not sold a share there yet. The ZIM was out at $0.70 after the initial pop. I plan to book some profits if it will pop back towards the opening levels later today. At nearly 3,000 BOEpd, they could argue their wells are close to the upper end of the range in the Williston, so call it 750 to 1 mm barrels. They have 30% of these and will drill another one this late Spring. If you take the low end of that reserve range and call all 6 wells worth 1.5 mm barrels net, that’s like have 9 Bcfe added to a firm that only has only 18 Bcfe booked.
So the stock could work higher into further updates there, giving me reason to maybe hold half. They also have 46K net acres in the Niobrara, unsure what the plan is there, could be interesting to watch it unfold with some shares in the portfolio.
Eli – keep the MHR comments flowing, right you have been.
Nicky – the market is quickly approaching your 1,185 trouble spot.
HAL: Declining activity in Mexico in Q1 with crude in the $80 range should ring alarm bells on Mexico production. Except they were already ringing of course.
(Assuming HAL’s comment was oil focused?)
Dman – yes, it was an oily comment, but not a longer term issue on activity, MEX trying to sort itself out, Chicontepec production has been disappointing, Cantarell declines slowing as I understand things now.
z — good call on the MMR puts. Nice to see you can make money, swinging in either direction.
HAL moving into a zone of daily SMA support…FST approaching $26 support level…
BOP – wondering if that chart will go ahead and break down.
Thanks JB, market acting buggerish again.
Surprised to see the TISSDZ up today. Not because I think anything was bad on that call for the ultra deep but in general, guilt by association usually prevails.
Z: 83 Did see a bigger $ commitment from MEX re Chicontepec over the weekend. This doesn’t mean they know what they are doing but I think they see the writing on the wall.
Tom – Was there a story on that, I did not see anything.
z — MMR just not giving anyone a reason to buy for the foreseeable future. Combine that with declining production (at a faster rate than they projected at the beginning of the year) and the need for capital at some point… think we could see a 12-handle on the stock in a day or two. Can’t picture it dropping below $10. But don’t see MMR headed back to $18 any time soon.
HeadTrader saying that the SEC was NOT unamimous on their decision to charge Goldman with fraud…
his statement “it’s all political.”
#88 My impression of Mexico is that it is descending into chaos. Just an impression, don’t have much to back it up. But I find it hard to be confident that they will get it together.
re 90 – agreed. Maybe it touches the top of the gap just under $11.
More MHR, this time from Global Hunter Securities:
Event: First Eagle Ford Shale drilling in 30 days; Raising price target and publishing 2011 estimates.
Summary: Magnum Hunter Resources (MHR) plans to spud its first Eagle Ford
Shale well on May 20th. The company plans on drilling three wells back to back targeting the “oil window” of the Eagle Ford Shale. Recent industry
announcements regarding this area are converting concept to reality. MHR began
amassing acreage early in the play and now has up to 50MM barrels of oil exposure
on its acreage. We are therefore reiterating our Buy rating and raising our price
target from $3.50 to $6.00 per share.
ZTRADE – ZIM – HAL
HAL – Added a second set of (10) May $32 calls for $0.93 with the stock at $31.45, off slightly in a down market.
89 It was a headline on rigzone. The residual of my compliance issues does not allow for me to forward links. Sorry.
Okay as we now have five waves down we can eliminate the more immediately bullish scenarios. A low is likely to be found between 1181 and 1185 (we have seen 1183 which also happens to be the 20sma. Once the low is in expect a bounce back to the 1200.
No problem and not surprised, there have been comments on a new strategy there for months now.
MMR now coasting sideways at $13.55, sort of refusing to stride lower. I will not be around this put trade very long. Up 34% since inception at this point and a bounce in the market could easily erase that. So fair warning that if we don’t see it sell lower soon I’ll collect my chips and take another look on a mid day bounce if that happens.
JB voted. Looks like you have earned the highest loyalty based on “votes per hit”.
Thanks for sharing your work.
SSN has traded 3x normal volume now, looks to exhausting some of the profit takers.
Wonder who the EFS partner might be?
April 19, 2010 10:37 AM EDT
Canaccord Adams maintains a ‘Buy’ rating on Magnum Hunter Resources (NYSE Amex: MHR), raising price target to $5.
Canaccord analyst says, “At the IPAA convention during the week of April 12, 2010, more positive announcements were made on the liquid rich and oily belt within the Eagle Ford. With natural gas supply still looking robust, producers are gravitating towards liquid rich and oily trends in the Lower 48, which bodes well for the Eagle Ford Trend. MHR also presented detail prospect maps showing the proximity of its acreage to that of EOG which has an estimated net resource base of 900 mmboe within oily Eagle Ford play.”
Next Catalyst: “We expect MHR to announce a partnership within the Eagle Ford trend. The two parties planned to combine acreage to create a larger foot print. MHR plans to drill three horizontal wells back to back starting in May 2010.”
Eli – best guess would be GDP.
BOP: GS bonds an opportunity into the S&P – Moody’s downgrade today?
Re: #100 skimo…thanks much for the vote…
tomdavis — GS = too high-grade bonds for me. I would consider the stock, before the bonds. But, that’s just me.
JB – the MMR looks set to crack the last support soon. Then you have to start thinking partial gap fill.
#103 that’s rich! Why not.
Z: You see anything re RIG today?
ZTRADE – ZIM – MMR
MMR – Sold the 25 puts taken earlier for $0.60, up 46% to my cost, with the stock down 13%. If it bounces I’m like to reload this position.
BOP-do you have any antelope bonds loping by-I need to start moving out of the line of fire for the summer months-summers have NEVER been good to me.
Thanks.
Tom – comments from TPH early, other than that no.
re 109 buyback activity I think
Z – Jat Thanks. 110 NICE
Starting to see that differentiating bounce on EXXI now.
bought some EXXI trading shares. plan to sell +$1
Tom – Re 114 thanks, liking the ZIM more each day. Market it gets it wrong or gets it too slowly about a third of the time. Nice to be sitting with cash waiting to pounce on that.
…and right now I’d argue they are getting HAL wrong due to the market day, ignoring a big change in sentiment there.
Gutsy add BOP, very much agree with your thinking there. I continue to hold EXXI in the ZLT but have no options on at the moment.
EXXI = trade the stock situation for me. Too tough to trade options on that one. If i’m “trapped” in the stock, I don’t mind living with the position for a while. It will move up when oil rebounds a bit and people continue to differentiate from that deflating MMR conf call. JMHO.
The MMR bonds might be a good buy today…
Z – if you think crude will still mostly track the SPX then it is in for a decent correction, looking at the SPX chart. So far SPX has corrected 2.2% from peak. Woweeee! How’s that for volatility? I just find it hard to believe it stops there after the huge run.
Dman – I continue to think crude will be range bound in the $75 to $85 territory going into summer. I think it will trade more and more towards the high end of the range as summer progresses and above it by the 4th quarter.
MMR took out the low end of the trading range (looks like the lows after the original Davy break out were 13.28), I was a little early to take profits … so be it. I will look to reload on a significant bounce.
Totally BANISH the thought of picking bottoms. Erase it from your “To Do List” entirely. Focus only on Trades That Make Money.
Go for the filet. Trying to eat the whole cow will only make you sick.
MMR put was a great trade!! There will be more.
Z- What do you think of Henry Groppe? He has made a contrarian call of a lot higher gas this summer than most think…..he calls for $8 gas by end of summer.
http://www.theglobeandmail.com/globe-investor/a-contrarian-makes-another-call-this-time-natural-gas/article1538686/
#125 – I don’t think anyone is going to say, “Well Z, ya know 46% up in a couple hours is just not good enough”.
DrL – I don’t know him other than as a name. Will read it. That call is hard for me to get to as I think the only things that can drive that are higher industrial demand AND a sharpl decline in conventional volumes and that’s too quick for me to imagine happening. It’s generally a slow petering, not a cliff dive.
Dman – they can if they want but I’ll just ignore them.
Nobody wants to bid up MMR. They know Z is waiting for ’em.
RBC out calling the HAL quarter a good start to the oil service 1Q reporting season. I’d agree. Also points out that the comment on stimulation activity is good news for BHI (I said that earlier) and they add to that SLB, SWSI, CFW, PTEN.
BOP had the maybe smarter play with the EXXI long, would have made a very nice paired trade.
JimBob is walking the streets of New Orleans, as we speak, with his new tatoo on his forehead. More and more people getting the msg.
And Dman, you’d be surprised. Got an email last week asking me why I took 39% in a 1 day trade on HK, why so quick, why not hold out for more???!!! I just shrug.
BOP – long term I still like the idea, but it’s got dead money, gap fill all over it now. I sure would like to see a dead cat bounce so I can reload again.
#133 yeah, with calls that had a day or so left. Why wouldn’t you hold ’em? Why!!??
z — long term, I think the Ultra-Deep is a viable, economic, exciting and profitable play. I just intend to ride EXXI in that race for now.
MMR shot themselves in the foot this morning… and they have too many balls in the air right now, with declining production. Will the stock be higher at some point? Youbetcha. But, until I see another quarter of operations, just consider the stock to be untouchable.
Dman = LOLOL. Ok, now get this HAL trade up off its butt.
Too bad, so sad watch:
http://news.yahoo.com/s/ap/20100419/ap_on_re_mi_ea/ml_iraq
Adding MHR and VQ to tomorrow’s Catalyst Update, did anyone have another name?
headlines = “Second Icelandic Volcano Has Reportedly Erupted.” No idea if this is true, or not…
Also, heard the Prime Minister of Iceland said it’s all a big misunderstanding. He said to send “CASH” not “Ash.”
(Trading desk joke…)
134- Speaking of gap fill, ARD close the day before the SD deal announcement was $34.26. Todays low $34.27
#140 cash & ash just slightly different forms of same thing 🙂
Ouch = SD below $7.
Natural gas works ran or shine, still of night, or ash clouded day.
Z – I can’t shake the idea that the SPX closes weak, dragging big caps like HAL with it.
Re 145. Very possible. S&P shot up earlier on what? Leading indicators, then sells back. So yep, could do that and be a drag. Market aside, sentiment change at HAL is pretty big. Which could prompt upgrades. Number for at least 2Q are too low.
#126: if Groppe is correct, MMR will have friends again in Sept.
9 flights cancelled out of St. John’s Newfoundland due to ash at that location
I’m guessing GMXR’s news wasn’t good.
Reef – got thoughts on MMR /EXXI?
Dman – that was a larger casing than they’d previously used, I even had it on the Catalyst List. The rate is OK but not world beater.
monday monday…can’t trust that day
Z, I’m being touted LNG (stock). It seems to me they are in the business of selling sand at the beach at this stage, cheap for a reason. Is there anything I have missed?
Lot of bottom fishing going on in the group, decent moves on names like BEXP and WLL off the lows.
Popeye – I’m not a fan. They have been proponents of the gas tsunami building regas and storage capacity to match their belief and now applying for licenses to resell gas that is shipped to the U.S. to other tropical locales. I don’t really get it. Lot of debt and I think a flawed macro outlook but I could be wrong.
our former friend WRES is seeing some heavy buying last couple of hrs…guess it wants to retake the $3 handle Z mentioned
WRES breaking out, wonder what’s up.
Jivey – maybe a Niobrara run rumor.
I bin trying to start one re: WRES and Niobrara…I’m that kind of a guy you know
not a lot of people at the race track know what Niobrara is though…they think she musta won ‘da Illinois Derby or something
Very odd day of trading, meandering, energy getting left in the dust on the dollar rally except for a few names. Volumes all over the map as well, some very high, others paltry. Weird one.
Jivey – Samson would be a good name for a horse too.
MIDDAY OVERVIEW (from about 2 hrs ago)
Market Update – equities saw a bit of buying in the morning, but are coming back for sale heading into the afternoon (so far we have bounced off the 20day MA at 1183). Earnings reports continue to come in, but it’s going to be a lot harder to impress on back of last week’s very strong numbers. Meanwhile, there is a lot more regulatory risk following the SEC/GS news from Fri and the ongoing push to pass financial reform (Obama will be in NYC on Thurs to push on the latter issue). Some of the highlights on the earnings front this morning – PHG, C, BOH, HAS, HAL all came in ahead of plan (all shares traded higher this morning initially but are coming for sale….similar reaction to what we saw on Fri when BoA and GOOG both saw selling pressure even before the SEC news hit). The desk is very quiet today as traders gear up for a very busy week of earnings (according to DJ, a third of the Dow Jones Industrial Average and more than 20% of the companies in the Standard & Poor’s 500 Index will post quarterly results this week). In addition – the Greek situation remains very unresolved (Greek CDS spreads widened to records today as the EU/IMF mission was delayed b/c of the Icelandic volcano and Germany’s A Weber apparently has said that Greece may need even more aid than has been agreed to). The dip buyers, which have been so helpful since the market last put in a bottom back in Feb, aren’t really coming in to take advantage of the weakness. That said, we aren’t seeing large sellers or shorts for the moment (although the bias remains to the sell-side w/shorts looking for ideas). Def. seeing some of the higher-beta groups see larger declines today as investors look to de-risk (inc. regional banks). That said, we aren’t seeing a rush into riskless assets (interesting that 2yr TSYs actually weaker today and gold is flattish-to-down), indicating the market is in profit taking mode for the most part vs. wholesale liquidation of risk.
Equities Technical update – from JPMorgan’s M Krauss – “First support rests at the 1175 Apr 8 low, then 1165 Feb 25 38% retr. As long as the 1150 Jan peak holds, the market can still see higher highs into June”. People are also watching 1183 as the 20day MA for the sp500 cash.
Equity sectors – Materials are leading the market lower as a stronger dollar and China property market tightening weigh on commodities. The group is off around 1.5%, led lower by integrated steels (X and AKS are both off around 5%) and fertilizers, which are off 3-5%. Tech, industrials, and energy are the next weakest, with each group off around 0.75-1%. Investors look to be moving out of the high beta outperformers and into safer assets amid the Goldman, volcanic ash, and China tightening worries. Financials are mostly in line with the tape as C’s earnings give the group a little support regional banks which are lagging. Utilities are also down, but only around 25 bps as their lower beta nature gives the group a bid. Telecoms are outperforming today, up over 50 bps and led by S’s upgrade. Healthcare is also outperforming as a safety bid for investors looking to de-risk.
Financials credit – GS CDS is out another 10bp, adding to its ~45bp widening from Fri (so Fri morning GS was at ~78bp and now its out at 135-140bp). MER is out another 10bp today (adding to its 25bp widening from Fri). The larger money center banks are slightly wider – BoA is out 8np today (was out 15 on Fri) and C is out 8bp also (was also out 15bp on Fri).
Commodities: Commodities are trading lower across the board. Gold rallied in the morning, though off its highs around $1132, down ~0.5% Copper trading similar to gold, falling in the morning and is now down ~0.9% Oil has been weak throughout the day, and is trading just north of $81, down ~2.7% Natural Gas sold off sharply, down ~2.9%, around $3.92.
FX: USD (DXY) is up ~0.35% trading around $81.10, although off its highs. The dollar has also come off its highs vs. the euro and pound, up ~0.4% and ~0.65%. Both the dollar and euro has rallied throughout the morning vs. the Yen, trading flat and down ~0.3% heading into the afternoon.
Corp. Credit: Corp Credit is mixed with IG underperforming equities and HY trading in line. IG 14 are out 3 ¼ bps while HY has lost 19/32 of a pt.
Treasuries: While there is some profit taking/movement out of the higher beta equities, there hasn’t been a rotation into safer assets as treasuries (along with gold) have weakened today. The 2s are yielding 97bps while the 10s are yielding 378bps. The 2-10 year spread is 2.81 bps.
GS actually green, market up now, fairly strong for the DJIA, not getting any play in energy land today other than EOG and some names that were already up. Waiting on HAL to notice. SSN up 25% on the day, still holding.
GM to repay $4.7B ahead of schedule.
I wonder if GM released more bonds to do that, assuring they are first in line if they go bankrupt 😉 :).
Ha
Very odd day in energy. All the Majors up, a few oil service names but not the big ones, most E&P red. WHX and HGT moving higher in the royalty trusts, MLPs pretty flattish. Suspicion is that worries over an overdue pullback in oil and the fact that the equity market rallied after oil closed, leaving the stocks somewhat directionless on the day.
By the way, have not yet been convinced by the margin ramp for the refiners and the advance in that group has not yet proved sustainable. Friday and today shows them rolling lower, not higher. Expectations are low for the quarter and the 2Q is setting up to be stronger than the ago quarter. So we could still get a move higher, and now from lower levels, on a somewhat more positive tone from the conference calls.
#145 I managed to be wrong about both parts of the sentence. SPX green & no effect on HAL.
Just call me the contrary indicator.
#107 MMR…updated the daily…MMR holding right now at daily trendline support…if it finds feet, it could try to retest lower descending triangle trendline resistance at $14.50 (previous support) if support fails, there is major P&F trendline support at$ 10.50 to $11.00, which finds help from the 200 day SMA at right about that spot…if MMR was going to take a stand…this would be the place…
MMR…update…
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
Thanks JB, already gone but will take another look if it really gets a significant bounce.
HAL seeing some bigger late day volume, targets are being reiterated at much higher levels than the current price, maybe there’s a bit of a trust issue due to the soft international margins in the quarter. That should pass.
Car Execs Predict: 41m Cars Per Year In China 2015.
The 50 executives expect “steady growth of the Chinese auto market in the future, with a projected average sales growth of 20 percent per annum between now and 2015”, said John Hoffecker, managing director of AlixPartners.
http://www.thetruthaboutcars.com/car-execs-predict-41m-cars-per-year-in-china-2015/
I forget how big the U.S. market is, about 10 mm a quarter?
US sells around 15.5-16.5mm cars in a normal year
Ok, thanks, told you I forgot. Wondering if that’s like global U.S. car maker sales per quarter.
Nicky – any end of day levels thoughts for tomorrow?
We haven’t had that “normal” year in a while. Isn’t it more like 1 to 1.2 million now?
Annualized rate ranging from 10 to 12 mm I’m told.
Beerthirty.
WFT only thing on the earnings front tomorrow.
New Cat list tomorrow.
wotta Monday eh…
voted for JB btw…thx for all that work buddy
Cash-for-Clunkers temporarily boosted car sales to a 14mm/yr run rate… but car sales have been averaging just below 10mm/yr during the recession. Recently ticked up somewhat to just under 12mm.
Since 1999, annualized car sales in the US have held right around 16.5 – 17.0mm until Fall 2007… when they literally fell off a cliff.
Oops – zero missing.
Re: #184, jivey, thank you…
Not sure what to think of today and friday’s actions. The SEC voted 3-2, right along party lines, to go after Goldman Sachs. When the details about the split on this vote were confirmed around 2pm today, the mrkt rallied.
So what does that mean?
IBM slipping on numbers after the bell.
Anyone see a broker note on WHX, up 2.6% today.
With corn becoming much cheaper and crude up, ethanol becomes more attractive. I recall one of the refiners was buying ethanol plants cheap a year ago. Do you have any thoughts on this idea?
VLO has been a big buyer of ethanol production capacity. I have not seen anything fresh on it in awhile, maybe they talk about ethanol economics on their 1Q call, sort of doubt it as they just like to say they are buying assets for cents on the dollar. I have not looked at the pure ethanol names in awhile. PEIX is a dollar stock now having already had a big run and lost most of it. STKL has just about doubled since the start of the year. Don’t see some of the other ones I used to track.
This will cause some weakness…..I will average into it….what say thee, BOP?
Star Scientific files for 18,050,847 Share Common Stock offering selling stockholders
elijah — CIGX S-3… i confirmed with the company… it’s a registration statement that covers the private placement shares issued in March (the private placement that Roskamp participated in). No “new” shares. Just registering existing shares.
Crude Oil back up over $82.
194 – thanks for the update BOP.
BedTime Market Strategist
Tick Tock.
Today was a relatively mild session where investors waited for the dust to settle unsure of whether or not the SEC’s charges versus Goldman Sachs will escalate to the next level. Around the globe, politicians grabbed the story and ran with it. They know they want investigations, but most still don’t have a clue of what they are looking for. The politics of the story emerged when the newswires reported that SEC commissioners voted 3-2 along political party lines as to whether to pursue the case. This only added credence to the belief among many that the Complaint lacked a smoking gun for an indictment of fraud. Investors will be looking for the other side of the story and additional details tomorrow on Goldman’s conference call following its earnings release.
All in all, today’s trading action was fairly respectable. The downside follow through was minimal and then met with stability. The market was so enamored with the Goldman story that the Asian sell off overnight, which included a nearly 5% drop in Shanghai, almost went unnoticed. New wides in Greek sovereign CDS also remained under the radar. The German politicians appear to be having a change of heart. Last month, Finance Minister Wolfgang Schaeuble was floating the idea of booting delinquent EU members. Today he attempted to rally domestic support for a bailout remarking that “We cannot allow the bankruptcy of a Euro member state like Greece to turn into a second Lehman Brothers.”
Goldman’s share price appeared to serve as a leading indicator for the day’s trading action. Making its intraday low early and then stabilizing kept investors on an even keel. When the stock finally turned positive for the session, which coincidentally followed the headlines regarding the SEC vote, the S&P 500 moved with it. Speaking of leading indicators, the Conference Board’s March Leading Economic Indicator data was released today. Today’s report handily beat estimates, and was led by improvements in labor. In addition, both January and February experienced ample upward revisions. Based upon the chart of the LEI below, the economy should be primed for a good second half.
#194 Danke schön! I saw the headline and assumed an offering was imminent.
elijah — no problem !!