Thursday Morning – Oil Review Plus Gas Review Plus A Lot O Earnings

Posted on by zman

 

Market Sentiment Watch: Jittery. S&P popped Spain's debt ratings yesterday to mild confusion and later mass yawning. Italy and Ireland on the short list for things that should be downgraded sooner rather than later. Meanwhile, Fed just about photocopied last month's statement (and to think I write something fresh every day!) . In energy land we have another swarm of earnings reports with comments in the Stuff section below. Some time today, EIA will release the natural gas monthly with revisions for 2009 through February 2010 which should make for a volatile day in the natural gas world.

Ecodata Watch:

  • Jobless claims of 448K vs 448K expected
  • Tomorrow we get data on 1Q GDP, Chicago PMI, and consumer sentiment.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today – Earnings briefs (CLB, APA, LINE, WLT), Earnings Watch (WLL)
  6. Odds & Ends

 

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $9,900
  • 55% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • None

ZIM (Zman Inefficient Markets portfolio):

  • $24,200
  • 80% Cash
  • Yesterday’s Trades:
    • Sold (100) VLO $21 Calls, up 38%, with the stock at 20.40. Would have held longer but S&P downgraded Spain and the market looks a bit dodgy.
    • RRC - Added (30) $52.50 calls for $0.39 with the stock near the LOD at $47.60.
    • RRC - Added (10) May $50 calls for $0.90.

 

Commodity Watch:

Crude oil rallied $0.78 to close at $83.22 yesterday, after the EIA released  a mixed bag of numbers in terms of Street expectations (bigger builds for Crude and Distillates; unexpected draw on Gasoline stocks (see below)). This morning crude is trading up a buck plus.


Natural gas inched up $0.03 to close at $4.35 yesterday. Today is the long awaited EIA day of natural gas supply revisions. To play along at home you can go to this link and hit refresh repeatedly during the day until the new month's data is posted, or you can wait for me to announce it. I plan to have the usual Natural Gas Monthly Supply Slide Show out with the Friday post. This morning gas is trading flat.

  • Reaction to the News Watch:
    • If we get a large revision, one big enough to move the gas strip tomorrow, I’ll very likely take a position in SWN as they are relatively naked and essentially 100% natural gas leveraged. If prices rise they benefit the most, especially given strong growth based on a planned outspending of cash flow this year.
    • Other thoughts would be heavily shorted gassy names: GDP and GMXR come to mind as the two most heavily shorted names in the E&P group.
    • And finally, U.S. gas leverage Service names, with HAL, NBR and probably BHI at the top of the hit list for an advance on a report that would be bullish for gas. 

 

Natural Gas Preview

  • My number: 65 - 70 Bcf
    • Last Week: 73 Bcf Injection
    • Last Year: 77 Bcf Injection
    • 5 Year Average: 63 Bcf Injection
    • 10 year Hi: 103 Bcf Injection
    • 10 year Low: 5 Bcf Injection
  • Street Consensus: 71 Bcf Withdrawal

EIA Oil Inventory Review


ZComment: Crude should run into head winds until either product demand picks up or refiners decide to go back on hiatus. The current levels of gasoline and distillate production are increasing slightly and incredible swollen stock levels respectively. The continued ramp in Cushing stocks is also a concern for near term prices.

Crude:



 

Gasoline:




Distillates:




 

Stuff We Care About Today

Earnings Briefs (names I'm not in now but track pretty closely)

  • CLB Reports Better Than Expected and Record Quarter; Numbers Should Be Headed Higher
    • Revenue of $188.3 mm vs $183 mm expected.
    • Operating margins were 27%, near record
    • EPS of $1.38 vs $1.31 expected. Guidance was $1.35 to $1.38 and had been revised higher once.
    • Brief Nutshell:

      • Outperformance was again driven by strength in all three divisions (Production Enhancement, Reservoir Management and Reservoir Description)
      • Margins remain strong for all segments
      • Reservoir Description continues to run hot internationally, including in Iraq
      • Reservoir Management continues to enjoy expanding joint-industry projects in the Eagle Ford, Haynesville, Marcellus shales and in the Granite Wash play. A joint-industry project has been started in the Niobrara.
      • 2Q10 Guidance remains equal to number put out at mid month.

        • Revenue of $185 to $190 mm vs current Street estimate of $190 mm,
        • Operating margins forecast to be 28%, a company record.
        • EPS of $1.39 to $1.44 vs current Street estimate of $1.40.
      • Balance Sheet: Net debt to cap of 25%.
      • Valuation: Interesting comment in the pr about them being the number one performer of 30 Service names in terms of ROIC.

        • 2010 P/E of 26x (the denominator here will be rising after this report)
        • 2011 P/E of 22x
      • I don't see how these guys continue to remain independent of SLB or HAL for very much longer.
    • Conference Call: today, 8:30 am EST

 

  • WLT Reports In Line Quarter 
    • Revenue of $312 mm vs $306 mm expected
    • EPS of $0.88 (ex items) vs $0.89 expected
    • Brief Nutshell:
      • Strong coking coal settlement price for the next 6 months.
      • I'm not chasing up here but I do think this is one of the best positioned coal names in the group with growing leverage to metallurgical coal, yet still trading at a substantial discount to it's bigger cap peers. 
    • Conference Call: today, 9:00 am EST

 

  • OII Reports A Brick; Reaffirms Prior Guidance
    • Revenue of $435 vs $440 mm expected
    • EPS of $0.71 vs $0.74 expected
    • Brief Nutshell:
      • 2010 earnings guidance reaffirmed,
      • 2Q guidance set at $0.80 to $0.85 vs current Street at $0.85,
      • ROV operating income hit a new record but subsea projects work was off,
      • Subsea umbilicals market remains very competitive and they've been losing work to other firms (maybe CAM),
      • I've been looking for the stock to get hit so I can potentially go long during hurricane season and this report may be my chance.
    • Conference Call: today, 11:00 am EST

 

  • LINE Reports Beats Numbers; Coverage Ratio Up; Granite Wash Could Add More E&P-Like Sexiness
    • Production of 213 MMcfepd, just above mid point of guidance at 210 MMcfepd.
    • Revenue of $247 mm vs $209 mm expected
    • LOE significantly below guidance
    • EPS of $0.36 vs $0.35 expected
    • Brief Nutshell:
      • Distribution coverage of 1.26x, much improved from last quarter.
      • Drilled first Granite Wash well during the quarter, will test late May (will add to Catalyst List)
      • 26% of 2010 budget will go to Granite Wash drilling
      • LINE remains highly hedged, with 90% of expected production hedged through 2013.
      • I continue to hold LINE in the ZLT
    • Conference Call: today, 11:00 am EST

Earnings Watch:

WLL Reports Better Than Expected 1Q10 Results; Boosts 2010 Volume Guidance

The 1Q Numbers:

  • Production of 59,865 BOEpd (80% liquids) topped the guidance range of 56,667 to 58,889 BOEpd

    • up 10% YOY
    • and up 6% sequentially
    • March rate of 62,545 BOEpd
  • Operating Costs:  Better than expected. 
    • LOE $11.30 / BOE (low end of the guidance range)
    • G&A $2.53 / BOE (mid point of guidance)
  • EPS of $1.15 (ex items) vs $1.10 expected
  • Balance sheet continues to improve with debt to cap now at 25% and their $1.1 B borrowing line reaffirmed but nearly untapped.

Guidance:

  • Volume Guidance Going Up: 2010 volume guidance goes from a range of 9.5 to 11.5% to a range 11.5 to 13.0% 
  • Cost Guidance Going Down:  Per unit LOE and G&A ranges moved down slightly from the prior range. The company is also saving on transportation costs out of the Sanish Field after completion of its new 8" line linking it to Enbridge (savings of $1 to $2 per barrel).

 

Operational Highlights:  Nothing earth shaking, they just keep rolling ...

Sanish Area:

  • Not a lot new here, 1 infill well testing at 2,946 BOEpd, and a Three Forks well test at 1,262 BOEpd.
  • Sanish field production was up 71% YoY to 15,180 BOE in 1Q10; March production was 16,640 giving an idea as to the velocity of the ramp here.
  • 9 rig program planned through 2012.

Enhanced Oil Recovery Projects:

  • Postle field hit a 36 year production high at 9,610 net BOEpd in March 2010.
  • North Ward Estes field hit 8,080 net BOEpd in March 2010

Lewis & Clark

  • Plan remains the same: plan to drill at least 13 additional Three Forks wells, beginning mid May. This is slower than I expected as the rig has been on site for over a month.
  • acreage of 211K net acres is up slightly from last mention.

 

Nutshell: Better than expected quarter with costs coming in at the low end of the range is always a model pleasing event. Higher guidance makes it doubly so. The name remains bottom of the barrel cheap for the Bakkens and most E&Ps, trading at a price to cash flow multiple 4.8x Street consensus 2010 of $17.44 and 4.0x 2011's $21.24. Estimates for both years should rise following this quarterly release. I continue to hold calls in the ZCAT and shares in the ZLT.

Conference Call: Today, 11 am

Other Stuff:

  • COG Updates Operations; Announces Eagle Ford Oil Window Discovery  - see press release, could make a move today.
  • VQ files $500 mixed shelf
  • BEXP, TSO, SWN report before the open tomorrow with Friday calls.

Odds & Ends

Analyst Watch:

  • FSLR - upped to Buy at Deutsche
  • FSLR - target upped $13 to $153 at Kaufman

 

226 thoughts on “Thursday Morning – Oil Review Plus Gas Review Plus A Lot O Earnings”

  1. z — awesome overview today… i don’t know how you get all that work done with just two interns. To add to the day’s summary, this blurb from TPH…

    Earnings snapshot – Tons of earnings today. Quick synopsis:

    o Strong – CRR, FTI, OIS, OKE, PDE, SPN, WLL

    o Strong side of neutral –EGN, HERO

    o Neutral – CAM, COG, KEG, OII, PTEN

    o Weak side of Neutral – HP, NBL, OXY

    o Weak – KBR, OKS

  8. bill — #2 an engineering friend in the business sent us pictures of the burning rig. The SCALE is mind-blowing. The fact that it is not worse is what surprises me. But, sounds like there is still enough standing pipe under the surface to allow the well to be capped. That is the hope, anyway. Best wishes and prayers to all involved in conducting that unbelievably massive and dangerous operation.

  12. Maybe they found their NS ptnr. Odd that it happened into the open instead of in front of it

  15. Eli – Saw the news bug about 2 hours ago but didn’t know what it was. Someone exercised options for about 3.7mm shares.

  18. Z: If you were going to your senior prom who would you take WLL or NFX? (EOG already has a date). You are allowed to wait til after CC unless you know now.

  20. That option exercise release has been on their web site for at least 12 hours, I would think it is something else.

  24. ECA really waking up. Probably time to punt that from the ZIM but will hold through the natural gas inventory numbers and maybe the supply data as well.

    This is the site to constantly refresh today for supply data.

  25. andy — good guess. Yes.

    TT = 55/45 SHORT call for best odds day trade.

    HT = still buy the dips and watch the headlines.

  28. Jivey – yes, it was odd timing as it jumped and I did not add more in the ZIM as I watched it go. Still thinking it can take out at least $75 in short order if it can breach the earnings day high of 73.19. If not, I still think it drifts higher in the coming weeks and months as the change to sentiment there has not yet fully been discounted by the market.

  30. Tom

    I see, prom date turned into marriage. In that case I think WLL doubles and NFX adds 50% unless either of them get bought. NFX is trickier for a buy out unless that buyer is APA or APC who could add assets that make geographic and play type sense.

  32. It will be interesting to note just how fast these acoustic triggers get installed. Especially on the to the center of the earth science projects. Jim Bob?

  34. Crude up $2.

    NG down a dime, a little strange, maybe some very short term buyers coming back out pre supply revisions.

  35. LINE – not going to listen to the call as I’ll be over on WLL but I have not poked any holes in the quarter so far. With the coverage ratio moving back up (announced with the distribution earlier this week) I could see them mentioning a potential resumption of distribution hikes later in the year, once they see how the newly acquired assets perform in the portfolio. This is the sort of think that can break the units out to the next level, potentially low $30s. This will be added to the catalyst list as the only MLP over there that has some E&P type sizzle via Granite Wash drilling.

  40. Reef – I don’t, will snoop around. That Taylor Sand well wasn’t too shabby either. HK used to drill those but deferred them with gas prices and Haynesville focus.

  43. #38, BP might be a good buy at around 53. May take two weeks or more for the dust to settle.

  45. WLL just keeps running, through 91. The power of boosting your production guidance, cutting your cost guidance, and not increasing your budget. Pretty impressive.

    I don’t expect BEXP to up numbers tomorrow but they may at their 2Q call. I do expect them to have at least 3 Rough Rider wells to talk about, as well as timing on their E. Montana and Rough Rider TFS tests.

  48. re 47. Assume you mean the calls in the ZCAT? If so, not far. I plan to hold through tomorrow for potential upgrades that could press it toward the $100 mark. I don’t care about the recent run in the name if I can say that even at $100 it trades for less than 5x NTM CFPS.

    Gas inventories in 5 minutes.

  50. Natural gas inventories:

    Prompt gas just before report: down 7 cents at $4.27.

    up 83 Bcf

    Street was 71 Bcf

    ugly number

  52. Excellent calls on the VLO and WLL, thanks Z for your excellent continuing education. I appreciate it.

  55. Z email. 15% in the whole. apparently if correct the Aussie’s have already recieved the filiing.

  60. Good morning.

    I am not going to be a lot of help today as I have two counts that are diametrically opposed.

    The bullish count has us in wave i of v up. Would likely target the 1210/1215 area before pulling back. Requirement for this to play out is that we stay above 1195 until we have five clear waves up.

    The bearish count says we fail around where we are now and that we are in ii C and heading to a low around 1172. If we were to take out yesterdays lows at the 1182 area this is the preferred count.

  61. TAT still on sale. Large holder still selling down. I have a 3 yr time horizon on this one, so view moves like y’day and today merely as oppys to add at nice prices. Company fixin’ to complete their acreage additions in Turkey shortly. Won’t need to raise a cent to do it either.

    Turkey is actually a great place to be an energy explorer. They need the hydrocarbons and are encouraging private industry to help them.

  65. i would guess Fido… but, it’s just a guess (based on the fact that they started the yr way overweight, as a firm, in the energy sector).

  67. Thanks Nicky, disregard the request I just sent to your email.

    re 62. Kind of like Greece except for all the debt.

    BEXP back to all time highs.

    NG down 30 cents, acting like a bit of an anchor on the gas stocks. Moves today odd as usual with names like RRC who is highly hedged down and SWN, who is basically unhedged giving the shoulder shrug to prices. That’s the impact of higher valuation on the shares.

  70. cargo rates have gotten better in the sector but the forward curves (rates) are weaker than todays spot rate

    exm looks like it will do fine in 2010

    half of its available days come up for renewal (2010) into a better enviroment
    so i expect the stock to do well

    Ive been nibbling at nm lately and will also nibble at exm

    i wouldnt bet the farm on it but 8 should be achievable this year and maybe more

  72. TAT is down from $4… so, not sure how “gentle” the sell order is. But, i hear ya on Fido’s Heavy Hand.

    reef — would that surprise you? I think it would surprise me….

  74. Honestly look at the last months trading range you’d have to say $3.80 with a split second spike to $4 on little volume. So we’re off the $3.80 level and not on big volume days. Looks like noise to me.

  76. Under the heading “I Like Watching Paint Dry”… on the DBLE conf call right now. Yaaaaaawn.

  77. does anyone still hold nna warrants

    interesting development

    this is a spac special purpose acquisition corporation

    the warrants come into play if 60 % of the shareholders vote yes in the proposed business to acquire tankers.

    On one side is sponsor , NM, who will get 6.0 m free shares or 20 % of the new company + 7.0 warrants worth 10 m come into play.

    Nm has added to their position an now own over 10 m shares of nna out of about 30..so those are yes votes

    a hedge fund has tied up 20 % of the votes to greenmail NM

    the warrants are down recently from 1.65 to 1.25

    vote in 4 weeks

  79. DBLE — CEO has actually learned how to pronounce “Niobrara.” On the last conf call, they acted like it was the first time they had heard the word.

  80. WLL Call Notes:

    they’re reading the pr at this point.

    First blush to NG numbers. NOT BIG REVISIONS. Jan 2009 number is down 0.6 Bcfgpd.

  82. DBLE — wow. Unacceptable behavior… DBLE quoted their GROSS acreage prospective for Niobrara. Q&A follwed up to get the net number. Totally uncool, Mr. Dole.

  83. ZTRADE – ZIM – SWN PUTS

    Added (10) May $39 SWN Puts for $1.07 on less than bullish revisions to natural gas supply out of the EIA. This name reports tomorrow and this will be a quick trade but they remain largely unhedged this year.

  87. DBLE quote of the day … “we believe in drilling through the drillbit.”

    nice.

  89. SSN – the filing if accurate ( and I believe it is ) calls for a news pending halt that may extend through Monday. That’s too long for a simple financing announcement, and therefore if nothing shows up by the end of the day something bigger may be in the works.

  93. indirect bahken play is useg

    they participate in a number of bexp wells

    trading at about book

  94. the gom players are weak

    exxi,pxp,mmr,atpg

    they should be using the dead man switch on their rigs

  95. bill – i still have some u think maybe we should have more?? could u tell me where they are exercisable again pls?/

  96. Averaging down on UNG here, bought some at $6.98, so my avg cost is now under $10…since this is a commodiity, my thinking is gas probably isn’t going to $0 any time soon…I’m prepared to hold this for the long run…

  97. Over the last few years, BP has the most spectacular (in a bad way) refinery explosions and offshore oil rig accidents. Gotta say, NOT a fan of that company. They seem to fall short on some everyday maintenance-type stuff. Very odd, for an IOC (that is not Gazprom).

  98. WLL Call Notes:

    Little new so far, I should have pointed out the Homberg well was 2,668 boepd, on the west side of Sanish field (most of their recent big wells have been on the east side).

  100. #93 RMD has visited with USEG. If I recall he indicated that this was going to be a fun quarter on the earnings front. Perhaps he will do a shout in on this today.

    Meanwhile the BP CAM RIG trio appears in a race to the bottom. Guess Warren called and let them know what the supercat premium will be next year.

  101. when will the wll cfo stop talking???

    i cant resist pxp at 31.50.

    It was 32 pre davy jones

  102. WLL – Lewis & Clark

    drilling in May in the extreme southeastern corner of the map, expect first well results in June.

  105. LINE conf call: if we can extend G Wash play into W. OK. it would increase play significantly. Test 1st GW well around 6/1, 2nd in July. Won’t curtail gas until $3.50. More acqs pending. 80% of buyers of 8.625% bonds were new to LINE. Old (2 yr. ago) organic growth target 2-5% enhanced by more productive inventory of prospects now: est. maintainse capx to maintain production goes from $66mm to $85mm P/F 2 Permian acqs or about 12% of EBITDA (implies $708mm). LOE will irse in 2Q to $1.92, avg. $1.80 for ’10.

  106. WLL Q&A

    Lewis & Clark – when first announcements

    3 rigs in May, 4th rig later this year.

    Results by mid to late June, so it sounds like a separate press release before earnings.

    They have a lot of good subsurface data on the Bakken and on the TFS, they are “as confident as they can be that they have another good play in which they control the acreage”

  108. WLL – Niobara

    Old area (Hatfield area) tries were not that great. New plan is to drill more on structure, giving them more natural fracturing.

    Leasing in new areas for Niobrara, hope to be able to talk more by 3Q.

  109. WLL – Lewis and Clarke

    That first well, the 1,970 BOEpd IP well, is flatter than what they expected, mirrors what they are seeing at Sanish. This has caused them to up the EUR at L&C from 350,000 barrels to a range of 400 to 500.

  110. RRC taking a hit in the ZIM, not adding given the gas data but I do think that is probably a bit of an over-reaction, again given their hedges and the fact that their play is more economic than most

  111. WLL – expressing absolute love for sliding sleeves, gave a good shout out to HAL’s frac jobs. Not big on plug and perf. Just mentioning so Wyoming has something to comment on.

  113. Re: #103 SWN…$40 is the technical level to watch…this corresponds with lower triangle trendline support on the daily and SWN remain in X’s on the P&F chart until a print of $40…since SWN is still on a P&F sell signal, we really would like to see it hold its X’s…

  115. Inspections ordered of all deep water wells in Gom. who benefits from these instpections?

  117. SSN story coming up. It is a capital raise (form unknown although warrants or rights have been mentioned and maybe a JV???)and will not be announced until Monday. Strange. DJN should have the story up shortly.

  119. ZTRADE – ZIM – OII

    Added (50) May $70 OII Calls on the mid and easily at $0.40 with the stock at $65 following a good earnings report (see post) and comments that the U.S. has ordered the inspection of all deepwater rigs in the Gulf, something OII is well positioned for.

  120. Z: In the recent past RIG has found support around $80. Don’t think I have the fortitude right now.

  121. Flipside to the OII trade, which I like anyway for the results and coming season, is that the term “inspection” may not be a physical one, but a phone call instead. Do you have x,y,z, safety equipment, etc?

  125. Another thought on HAL would be that it is more leveraged to natural gas drilling in NAM. So bearish gas data more of a hit to them.

  126. reg 125 thought about that but intraday chart indicates more related to fear in the gom. and lunchtime craziness I hope.

  129. I believe BP can be bought for a long term holding; but obviously it could go down more; the oil spill can not be more of a disaster than the threat of Russian nationalization of their holdings in myopinion anyway. I just wish I had a good guess on a price point for a snap back rally; but short sellers will pile into this at least short term.

  131. re 128 – I’d say weak group leadership today due to gas prices and fear of increased regulation and in some cases lawsuits.

    SLB off highs but not willing to capitulate yet.

    SWN thinking about breaking $40. They have earnings out tomorrow and rarely disappoint but if they have not gone ahead and hedged I’m not sure they will be able to catalyze/support the stock with well news. I really don’t think they have hedged.

  132. Also look at HGT; i hate it when it moves like that as I always worry about taking profits and try to buy it back lower; i just need to know when the next fund company decides to do a massive dump like we saw a few weeks ago! 🙂

  135. Do we think wll is poise for another leg up here? Sems down abt 3% on profit taking since the call ended.

  136. z — great call on the SWN puts. Again highlights that you can swing from both sides of the base. Very nice.

  138. last thing; WRES equals frustration; who would have seen thatmove coming?? Not me!

  139. No new thoughts on WRES from me, have not seen anything to warrant the move. Good for them, they could use the elevation from which to sell additional shares.

    Baylor – I continue to hold the calls and the common. The group has taken a right proper nose dive since the end of the call and WLL is actually flat since the call ended.

  140. I just have to wonder what type of a new government agency we are going to get now that the govt is doing a nationalization of BP’s containment effort. It sure would be a shame if we got a one time check from BP instead of a share of their earnings in perpetuity. Gosh I’m jaded.

  144. E21 experiencing the BP Oil Slick Smack Down… which is unwarranted, given that they do not have operations in the deepwater. Also, being that E21 is 68% oily production and this spill is actually causing oil prices to go UP… well… just sayin’….

  145. KOG pretty much 100% oil too… and unhedged (unless they layered on some hedges recently). Again… just sayin’….

  147. BOP – it’s probably also contributing to the rally at KOG and the other Bakkens. Onshore oil good … offshore oil bad. Sheesh.

  149. Interesting that SLB is getting a get out of jail free pass while HAL is being marched to cell block D. Usually there is more guilt by association. Even more interesting that the ZIM has SLB calls still.

  150. Let the Lawsuits begin!!

    BP and RIG being sued by Shrimpers… bloomberg headlines.

  151. I am a not a member of the oil industry so could someone please expain what is going on with the rig disaster. Latest reports say they found another leak above the BOP. Does this mean that this part is defective or that the explosion impacted all the piping etcetera down to the ocean floor and beyond?

  152. Paul — you probably figured it out… but E21 is my new shorthand for EXXI. Makes me seem more urbane and cool, don’tchathink?

  154. Gtinvest — #151 there was a great summary of the magnitude of the situation that came out this weekend. I am trying to find it (appears I deleted from my in-box). Will send, if i can get it.

  155. GT – It depends on who you ask. The last I saw the Coast Guard said a second leak was contributing to total production of 5,000 bopd, which is estimated using satellites and math. BP said the second leak is upstream to the first and that the original 1,000 bopd is the better number. ROV’s (remote operated vehicles) have so far been unable to activate the Blowout preventer on the sea floor. If they can’t then a coffer dam will be place over the wellhead to capture oil as it escapes and pipe it to the surface. Not easy at this depth. The permanent fix may be to drill a well that intersects the original well bore and which would divert flows into the new casing. This is tricky and may take multiple tries and maybe 3 months. Wyoming or TEXW or Reef or any number of other guys here can give you all the details if needed.

  159. re 156 – yes, you don’t go after small targets in deep water. But given the complexity of the operations it is a testament to the engineers that it doesn’t happen much more often.

  160. Report says the commissar’s will ban offshore drilling until a solution is found to avoid all mistakes

  161. z — bless you for #159. I have been saying the same thing. The “surprise” is not that it happens… but that it happens as infrequently as it does. (And that it was BP… well… just sayin’…)

  163. re 162. That link’s headline and what the company said are polar opposites. I despise the obvious short sellers. I mean, if you’re going to make something up and package it make sure you have some idea of that about which you speak. Jim Bob indicated nothing of the sort regarding “second thoughts”.

  164. 160 – Statement from the commissar will never happen / be mistake proof. Humans and Mother Nature are involved. Airplanes still fly. Not making an excuse, there are probably 3 or 4 near miss incidents that happen to occur at the wrong time which resulted in a catastrophic event. Happens in both safety and service quality.

  165. So I guess my answer would be, I had puts for a few hours and there may be some more downside due to lack of news/dead money status of the name … but the big move is probably done.

  166. bill — there is a community out there that believes that DJ and the like will never be produced. And there are shorts that are betting on that outcome. I have a different opinion… but, I expect we will see more of this kind of opining.

    Heck, you have senior execs of E&Ps saying they don’t think it will be produced. They aren’t participants in the wells, but that is what they are saying.

  167. RE 164 – Keep in mind BP’s safety record now though and the deficiencies found across all refineries post-Texas City. One could argue without much debate that BP does not have the greatest safety record.

    Those familiar with industrial safety and loss management and/or bowtie analysis would have to agree that it had to have been a series of things that went wrong causing their barriers to fail.

  168. EOG quietly walking higher in here (Bakken exposure and earnings next week with maybe a new area well or 2).

    WLL and BEXP not far from HOD.

    Why is the broad market still up this much? PIIGS no longer matter? Hmmm.

  171. ram — i bot some trading shares at 18.68. for the reasons i posted above.

  172. 169 – good question. I think you have some D.C. style risk entering the market, not sure how panicked it will make people for how long. But yes, at some point soon I will add a bit more.

  173. OII sagged then rallied nicely. Wondering if there is more to those inspections than a phone call after all. Or maybe its just the market and earnings and the coming busy hurricane season which could and has in the past been a boon for them.

  174. DC risk is a tide that will raise all offshore driller boats… and the cost of crude. Not that much crude produced onshore… so, cost of oil would go up. This would be differentially good for E21, as the 3rd largest oiliest producer on the shallow GoM.

  175. 167 – I agree, know BP and their safety programs very well. You should see the Slope procedures. Add in the leaking pipelines and rogue traders to the refinery catastrophe. I will say this much, BP uses their safety procedure for vendor management (pricing, risk reduction, contract creep) and they use safety to be able to include or exclude vendors from tenders.

    If I am wrong, they would have a much better record.

  177. Wyo — had friends at Amoco and friends at ARCO that were acquired by BP. The attitude, maintenance schedule, and money spent on assets under the care of Amoco and ARCO took a turn to the south under BP.

  179. So until today the quarterly theme has been oil better than gas. Now it is (however temporarily) onshore oil is better than offshore anything and gas. I agree that’s pretty silly. But it helps me explain BEXP going to fresh highs before earnings tomorrow. BEXP $20s alive and kicking.

  181. Re 175 – That’s the impression I’ve gotten based on case studies and other information. They are certainly nowhere near a Dupont. Safety is not a part of their culture yet.

  182. The ARCO crude oil tanker group had only three rules….

    1) Don’t spill oil.

    2) Don’t spill oil.

    3) Don’t spill oil.

    Everything else flowed from those top 3 rules.

  184. fats here liking SLB more and more…I should bet my waist size and not my hat size lot of the time

  185. Skipped APA call but I’d say not going that great. Stock has been on a tear so am not really surprised. Could be same thing for EOG next week if they have nothing new. I think they will but if it continues to run into the numbers I may trim and revisit during their call.

  187. ref 179, Would not this spill give more urgency to ng as a partial transportation fuel?

  188. ZTRADE – ZIM – OII

    Sold (50) OII $70 Calls for average $0.57, up 39%, with the stock at just under even on the day.

  189. Failed Tool of ‘Last Resort’ Doomed Rig Workers, Allowed Spill
    2010-04-29 18:02:29.214 GMT

    By Joe Carroll and Mark Chediak
    April 29 (Bloomberg) — A 2-foot-long metal clamp that failed to cut a pipe on the ocean floor may be to blame for the Deepwater Horizon catastrophe last week that killed 11 workers, sank a $365 million drilling rig, and cast a sprawling sheet of crude toward coastal fisheries and beaches.
    All subsea oil wells are equipped with steel blades known as shear rams that are supposed to slash through the pipe at the top of the well during dangerous pressure surges and close off the flow of crude, said Ron Bohuslavicky, the senior well- control instructor at Well Control School in Houston.
    The U.S. Coast Guard and BP Plc, which was using a Transocean Ltd. rig to drill the well that erupted on April 20, have been struggling to contain a gusher of crude that has been spewing from the seafloor for more than a week. A 2002 study commissioned by the U.S. Minerals Management Service, the agency that oversees the offshore oil industry, found that 50 percent of the shear rams tested failed to cut through pipe and halt the flow of oil.
    “It’s a bad situation,” said Bohuslavicky, who teaches employees from companies including BP and Transocean how to control blowouts. “The shear ram is the last resort when something like this happens, and if it had done its job then they probably wouldn’t have lost all those people and the rig.”

    Valdez Scale

    BP burned a section of the slick yesterday and may set more of it alight as it nears shore and covers an area twice the size of Maryland. At the current leak rate of 5,000 barrels a day, by the third week of June the spill will exceed the volume dumped during the Exxon Valdez incident off Alaska in 1989.
    The shear ram is part of a piece of equipment known as a blowout preventer that sits atop a well to reduce the force at which oil and gas travel to the surface from thousands of feet underground.
    Cameron International Corp. of Houston provided the blowout preventer used on the Macondo well on which BP was working when the explosion and fire erupted. The 11 deaths made it the deadliest U.S. offshore rig explosion since 1968.
    BP yesterday said it discovered a third leak, raising its estimate of the total flow to almost 2.5 gallons per second. The effort to combat the leak and skim crude from the sea is costing BP and its partners in the well $6 million a day.
    Boots & Coots Inc. of Houston and Amarillo, Texas-based GSM Enterprises Inc., two of the companies that extinguished hundreds of oil wells in Kuwait set ablaze by retreating Iraqi troops in 1990, have been brought in to help cap the leaks.

    Difficult Depth

    The location of the Macondo wellhead in 5,000 feet of water
    41 miles from shore is complicating efforts to halt the spill, said Stephen Sears, chair of the petroleum engineering department at Louisiana State University. BP’s attempts to manually shut valves on the ocean floor by employing remotely controlled robots have been unsuccessful.
    “With that depth of water, it’s not as easy to deal with as it would be if you could walk right up to it,” said Troy White, vice president of business development at Cudd Well Control in Houston.
    The pressure surge that probably triggered the explosion and fire aboard the Deepwater Horizon may have damaged valves near the seafloor so badly that they can’t be completely shut by the robots, said Satish Nagarajaiah a professor of mechanical engineering and civil engineering, Rice University.
    The valves probably also sustained damage when the 5,000- foot pipe connecting the well to the rig was severed from the vessel as it sank, Nagarajaiah said.

    Intercept Well

    London-based BP owns 65 percent of the Macondo project, with partners Anadarko Petroleum Corp. and Mitsui & Co. holding smaller stakes.
    BP plans to begin drilling a new well as soon as tomorrow to access the Macondo hole beneath the seafloor and cut off the flow of crude. The effort could take three months, said Doug Suttles, BP’s chief operating officer for exploration.
    The technique would involve pumping cement or a synthetic fluid heavier than crude into the well to suppress the flow, said Well Control School’s Bohuslavicky, who spent 30 years fighting blowouts and well fires before he began instructing others in those techniques about a decade ago.
    In the meantime, BP said it is building a dome-shaped structure to try to contain the leak near the seafloor so that it can be pumped into tanks on the surface. That may take a month to put in place, said Lars Herbst, a Minerals Management Service spokesman.
    “This is just a temporary solution, and the challenge will be how to keep in position and collect all the oil that is leaking,” Nagarajaiah, the Rice University professor, said.

  190. GT – I don’t think it should. Accidents happen. I think the merits of gas stand on their own as a transport fuel. And I don’t think DC will see it that way anyway. More like it was the nudge that gave approval to that offshore wind farm yesterday.

  193. Z what are ur thoughts on HAL here? I missed option opportunity when it was $29ish

  195. Re VLO – yeah, I left some $ on the table there and may revisit on a pull back but am not by any means complaining. Sometimes it takes the market a little longer than 24 hours to get efficient on new themes.

    Re HAL – I’m staying away for now, fearful of the unknown, overnight bombshell.

  197. FWIIW, STR now below $48, well off gap up of $52.50 upon announcement of E&P spinoff, and within striking range of the $46 gap. The name becomes much more interesting.

  198. z and Gtinvest — nice way to dribble the ball down the court, pass, make basket. Good teamwork, guys!

  201. WHX approaching $23. Still looking for a 61 cent distribution, could go as high as 65 cents but I doubt it. Looking ahead still looking for forward yield of about 10%. There is a definite thirst for energy yield in this market.

  205. baylor — the Shrimper Class Action is only the beginning… jmho, but there are probably easier fish to fry right now.

  206. UNG…close to record vol today at about 76 million shares, the only day with greater vol I believe was 6/11/09 at just over 96 million…

  207. APC might be worth a look here, tho… ML out with an intra-day note saying the sell off here is overdone.

  208. Great, we’ve got Waxman on heading the inquisition team.

    Congress Asks BP, Transocean for Gulf Rig Inspection Reports

    Jim Efstathiou

    April 29 (Bloomberg) — BP Plc and Transocean Ltd. were asked for inspection reports dating back to Jan. 1 for the rig that exploded and sank last week in the Gulf of Mexico.

    House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat, sent letters to the heads of the two companies today seeking reports on the blowout preventer and any other inspections of the Deepwater Horizon rig.

  210. EXXI back to where I added some trading shares. Figure it could go back to $17.50 or back up to $20. So, pretty evenly risk-weighted right here.

  212. BOP – you can’t remain urbane and cool if you flop between E21 and EXXI. It’s just not done…

  214. 177 – I work for and peer with Ex-Amoco and have a lot of friends who were in it. BP – Amoco …. the Amoco is silent.

    191 – It could also be a sympathy for market share they may obtain from Vetco-Grey / GE. They had the sub sea wellhead for the blow out. Of course nothing will happen to GE, fair haired golden child.

  215. Z: Contacted HK today. Got a confirmation that D Stoneburner is NOT on the current BOD.

  217. My apologies Tom, I mis-spoke, Dick has always been an executive officer and never been on the board, my misunderstanding.

  219. BEXP on tape, looking over, volume at top of guidance, earnings above Street.

    Stock bid $20.35 now but after hours those quotes are not worth a lot …. still better than being bid lower, lol.

  221. BB: That is one of the great things about the Zsite. We can all check and double check each other. (Less room for mistakes).

  222. LINE followup; discussed cash flow allocation acq. vs. repay debt vs. increase distribution vs. attractive return on G Wash wells. While they await GW results, 20mm/d wells play for themselves in 6 mo give-or-take (8/8ths, 50% to LINE). Want distribution coverage over 1.3X before raising, and lots of acq to do. (An investor I know thinks oily acq. is near and will galvanize interest in stock to $30.)
    Maintaince capx to total capx is high at 42%: ($83mm/200). Mgt looks at Maintaince/Eda where 83/615 midpt would be 13.5%, though on the conf. call they said 12% implying Eda of $708mm.

  225. see you guys tomorrow..thx for all the good tips;

    it’s a racing nite here in Texas; go baby go!!!

  226. Pingback: イマークの効果が凄かった!

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