Wednesday – Oil Inventory Preview and Lots Mo’ Earnings

207 thoughts on “Wednesday – Oil Inventory Preview and Lots Mo’ Earnings”

1. BP outperformed yesterday and is bid up strongly early this morning. Could be the placement of the relief valve and soon to be run out to sea domes are inspiring people to bottom fish. The other names associated here (RIG, HAL, CAM are so far not responding).

2. Analyst Watch:

   FST – BMO raises target from $35 to $41, rating Outperform.

3. Suggestions for ZEB website functionality? Send them to zmanadmin@gmail.com as Petra is bored.

4. Analyst Watch:

   BP upped to Buy at Panmure Gordon (UK broker), says reaction to spill is overdone.

5. TGA reports tomorrow premarket. Stock has risen from 4ish to 7.5ish last 2 months on success in Egypt. More to come I think with their horiz success. It’s all oil based on Brent pricing. Worth a listen.
   TransGlobe Energy Corporation (“TransGlobe”) (TSX:TGL – News) (NASDAQ:TGA – News) will announce its first quarter 2010 financial and operating results on Thursday, May 6, 2010 prior to the opening of the stock markets. A conference call and web cast to discuss the results will be held the same day:
   Time: 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time)
   Dial-in: (416) 695-6616 or toll-free at 1-800-355-4959
   Webcast: http://www.gowebcasting.com/1669

6. Futures turning lower post ADP number, crude off $2 now, dollar surging again. Going to be an ugly open at this rate.

   PQ bid up on earnings.

   XCO bid off on theirs.

7. XCO call starting now

8. Crude tumbling, down $3.50 now.

9. XCO

   1st Bossier test very successful, completing second well right now.

   Capital spending on track with plan, will stay withing cash flow.

   They will do a JV in the Marcellus. They are in discussions right now.

10. Morning all. Move down this morning looks like wave v and I am expecting a bounce! CNBC obsessing with Greek riots seems ridiculous and just sensationalism.
    I want to see 1165 hold on a closing basis on the SPX – if it doesn’t then likely we are going to test the 1140 – 47 area.
    If we can hold the 1160 – 1165 area then believe it or not there is a bullish count which says the move down is done.

11. Watching Greek riots on CNBC now. Makes me want to not go back any time soon.

12. XCO CEO

    “I know all of our competitors are now oil companies” , LOL.

    “We will do tack on acquisitions but we are not looking for oil acquisitions”

13. Nicky – agree on all counts with 10.

14. XCO

    We are a gas company, we are going to be 90% gas going forward. We see rising gas demand over the next several years.

    Lots of guys with long term drilling contracts and land are drilling uneconomic wells. We don’t understand it. We are seeing a lot of rigs moving from the Haynesville to the Eagle Ford seeking better economics.

15. WLL – Baylor this is probably going to be your shot at a lower entry.

16. Ratings Agency Watch:

    Moody’s cuts BP due to spill.

17. Market thought – I expect a bounce any time today. With that said, I’m not going to be the first guy bottom fishing and I will be slow to give more cash to this market without cause. I won’t be shorting anything and I don’t think this move down has much in the way of legs.

    XCO going over the financials which as you can read above were pretty good.

18. SSN on the tape with 4mm shares floated due to option exercises.

19. Nicky – thanks for those levels in 10, good to keep in mind.

20. Z:

    Why do you prefer HK relative to CHK even though it is priced at a very expensive multiple of CFPS?

21. Credit Market opening up with a continuation of yesterday’s Bad Hair Day.

    IG +7bps (wow) to 105 1/4

    HY -1 3/4 points (double-wow) to 97 3/4

    Our Little Friend TED is out to 20.5 bps on a combination of US Treasuries rallying and US LIBOR moving up. This is slightly more than a double, off the low of 9.6 on the TED, reached on March 16th. That was too low. 15-20 bps is about right (historically). Wider than 25 bps begins to inject some worry…

22. WRES numbers coming acro0ss the tape, looks like a beat. Someone should send them an alarm clock.

    I plan to switch calls to the PQ call at 9:30 am EST.

    Guru – I own some CHK common and I just see them differently. HK is more leveraged to the Eagle Ford which is more liquids rich, HK arguably has better acreage in the Haynesville than CHK, going by a consistent pattern of higher IPs, HK grows 30+% per year vs CHK in the 8-10% this year and a little better next. HK is more volatile which for options is generally preferable. Finally, HK gets a bad wrap as a serial common filer but that time is past for now through end of 2011. They set out to sell $1B and instead sold $1.4 B and have more assets on the table later this year. I just find it more nimble, a faster grower and that the Street just hasn’t given them credit for that.

23. GS’s 1160 target to cover almost hit (116.5)at 9:27 AM.

24. Guru – also should add that CFPS multiples are rarely comparable when you step down in cap from the big six E&Ps (which are cheap due to their size) (that includes: APA, APC, CHK, DVN, EOG, SWN and ECA makes seven if you include them which I plan to going forward after XTO was bought out).

25. ZIM may double up on those two positions taken yesterday, especially the FST as its had 4 upgrades and that really was a good quarter and ops update and it has seen no rally due to rioting Greeks.

26. PQ call starting now.

27. PQ up in a sea of red. Guidance appears to be in line with past levels.

28. We have HeadTrader on the lookout for any GS and/or JPMo activity in the futures pit. Will let you know when we see any action.

29. ZTRADE – ZIM – FST

    FST – Added (20) more FST May $30 calls for $0.50 with the stock at $27.70, opening lower with the group on Greek woes.

30. Support at 1156.

31. ZTRADE – ZIM – EOG

    EOG – Added (5) May $210 Calls for $2.15 with the stock off $4 on Greek woes. I continue to hold the $115 Calls here as well.

32. From BedTime Market Strategist last night… very good observations.

    Bloodletting.

    The latest round of the European sovereign debt crisis has finally caught up with global equity markets. It appears investors don’t want to stay in the game until true clarity has been achieved. EU leaders have declared a resolution to the Greek crisis so many times it is reminiscent of the litany of Treasury Secretaries over the past decade advocating the strong dollar policy of the United States. Now that the dollar is looking pretty good these days, it does not get mentioned. World markets await local governments to ratify the EU-IMF Greek aid package. The tragic irony is the Greek populace hates the package just as much as the citizens of the nations lending. We noted several weeks ago that IMF involvement would likely signal the end of the Euro, and the situation has only deteriorated. At this point it is hard to see how the Euro endures this crisis beyond stopgap measures designed to allow the currency to survive in the short term for an orderly dissolution later. Bringing the Greek situation to a resolution one way or the other will bring certainty to the situation. We continue to believe the CDS markets are nearly as much of a problem as the debt issue themselves. Despite our lack of faith in the ratings agencies, when Spain’s credit rating is 8 levels above junk and higher than most blue chip companies in the Dow Industrials it is no better to take signals from illiquid derivatives markets lacking transparency. We are also having trouble reconciling that Spain’s 4.13% 10 year yield indicates some type of immediate distress.

    Should it come to a Greek default it will mean additional headline risk and volatility, but the ensuing aftermath will likely create an opportunity for U. S. Equity bulls. When thinking terms of the hundreds of billions of dollars of debt Greece has outstanding (which gets smaller everyday thanks to the shrinking Euro), Lehman brothers generally comes to mind. Although Lehman had approximately 50% more in liabilities and less expected recovery values, it appeared to be a fair parallel because of the large dollar amounts involved. We have come to the realization that Lehman is not the correct analogy, Countrywide Financial is. Countrywide was the first “real” financial company to succumb to the credit crisis. Countrywide’s meltdown commenced in August of 2007. We have argued repeatedly, that Countrywide was the failure that should have happened. The money center banks could have easily withstood and digested the fallout from a Countrywide failure. A bad actor would have been removed from the system and those trafficking very close to the danger zone would have recognized the need to right their ship quickly by reducing risk and cleaning up their books. Instead the Federal Reserve engineered an investment by Bank of America in order to prevent BNY Mellon from liquidating Countrywide’s collateral they had on hand for a margin call. The company was force into the embrace of BofA 5 months later. Then 2 months after that Bear Stearns was hurried into the arms of JPMorgan. As the weakest players were saved first, there was no will to save the moderately stronger later in the cycle, thus pushing the financial system closer to systemic risk. Greece is Countrywide, due to the limited exposure and size (for a sovereign). If this sovereign debt crisis needs a sacrifice, Greece is the default that markets can most afford to see . A Greek default would push other nations with tenuous debt situations to take their medicine sooner rather than later once the example is made. The short term pain would likely translate to long term gain.

    The EU will continue to try to avoid a Greek default , but from our perspective it is beginning to appear that the EU’s fretting and lack of leadership when the crisis first emerged has done irreparable damage to this process. The EU leadership has essentially waited until the last minute to thread this needle and this is a tough feat to achieve under immense pressure. If member nations fail to ratify the package, the next step will likely be and expanded role for the IMF. Finally, if/when that does not work do not be surprised if the EU’s dominant member nations decide to take the capital they would have lent to Greece and instead divert it to create internal backstops within their own respective nations to help insulate their own banking systems (where the true risk resides) from the aftermath of a Greek default. If one’s goal is to save French and German banks, it is likely easier and cleaner to simply save French and German banks. While nobody likes bailouts these days they are certainly more politically palatable when kept local.

33. Z:

    Ref 22 and 24 – Thanks for the clarification regarding CHK v/s HK. I own a good size of CHK common in my IRA and was considering whether to add to that or add HK. Good insight.

34. PQ – we continue to believe production troughed in 4Q at 82 MMcfepd, this quarter was up 5%, and 2Q production forecast continues to show them rolling higher.

    PQ comment – no impact on our Shelf operations from the BP spill.

35. #22…indeed re: alarm clock…what a slumbering bunch

36. Credit coming off the trough…

    IG +6 now

37. Gold and SPX trading the same level again.

38. E21 — a colleague had dinner with CEO Schiller on Monday. Schiller saying 1(calendar) Q going to look pretty good. Normally, that kind of statement is a great big fat “RUN AWAY.” But with E21 being down so much, any good news would be met with a relief rally, I hope.

    I will be looking for a run-rate production level and how many wells they drilled and plan to drill this year. E21 has a FY june 30 ending, so the next report will take longer to put out. If E21 is at anything close to (or better yet, just over) 30k boe/d in production rate, I will be happy with the results. Also, I expect Schiller to provide some clarity on the “detuned 30k psi” wellhead they ordered. Schiller claims they will be selling hydrocarbons from Davy Jones in 12 months… but need to see what kind of a logistical timetable he sets out to meet that timeline.

39. CNBC gives whole new meaning to Greek fire. I’m not sure who the lazier bunch is, the professional WTO type protesters who are flocking to the Greek Isles for this event or the CNBC people who live for these kind of back ground shots.

40. RIG bouncing sharply now, bottom fishers are back. BP up as well and HAL and CAM well off their lows. If those last 2 go green there could be a significant bounce.

41. Nicky or JB – Do either of you have counts for the dollar?

42. ISM non-man at 55.4%, that’s a touch low.

    Switching to the CHK call.

43. Market really taking this “sell in May ” thing seriously. I’m adding to my LT high yield positions like CPL and ARCC. Not quite oil and gas but a little income now and then is nice.

44. PQ call just ended – positive on the whole.

45. If the spx can get back above 1170 then this leg down is done.

    Will take a look VTZ…

46. Energy yield names suddenly taking it on the chin across the board. WHX off 8% I would assume on the move in oil.

47. can you get thru to chk call?

48. CHK CC Notes:

    That increase in 2011 guidance is the second one in 6 weeks and is all attributable to growth in the liquids portion of the production profile.

    CHK – > 400,000 acres in the Eagle Ford, at a cost of about $1,400/acre.

    They will raise as much money this year selling acreage as they spend buying.

    Aubrey not happy with the “Johnny Come Lately” title with regard to oil production. I recall when he released 5 unconventional oil plays about 2 years ago. 4 of those were successful and they have added 8 more.

    He’s going all out talking up what they will do to revolutionize the oil business in the onshore U.S.

    Says they have 200+ wells drilling in the 12 oil plays to date.

    …

49. Bill – try this link:

    http://web.servicebureau.net/conf/meta?i=1113167945&c=2343&m=was&u=/w_ccbn.xsl&date_ticker=CHK

50. got on it thru yahoo

51. Bill – Aubrey almost sold me on adding it for a trade.

52. Oil inventories in 15 minutes.

53. Isn’t this “Greece contagion/Spain/Portugal fear” way overdone at this point.

    I’m struggling to see how this is pummeling EVERYTHING so bad.

    Personally I think the real fear that people eventually start questioning US sovereign debt at some point and rates start flying here.

54. V – could be re your last. Markets seemed to wake up to some new fear yesterday and combined with technicals and the run we’d had we got a sharp negative response. What all is Greece having to sell that has all this people in the Streets? The Parthenon? The beaches?

55. VTZ – totally agree re #53.

    As far as USD goes my big picture thoughts are that it rallies into October/November when a significant top will be made. In the short term we may have seen a top this morning and now will see a correction over the next week or so.

56. HT saying that ML has been selling spoos this morning in the pit. Guess who has been buying them…. GS.

    ha. Double-indicator. Smart buyer and dumb seller.

57. Re 51, take a shower Z.

    I just can’t wait for Aubrey to revolutionize onshore oil. He’s probably more oily than Chazen already.

    Am now thinking he deserves to star in a reality tv show titled “Flip This Shale.”

58. Jat – you haven’t seen me do a trade there yet, have ya, lol.

    Thanks for that color BOP.

59. HT thinking we close green today. His caveat, tho, is watch for headline risk.

60. EIA Oil Inventories

    Crude down $2.90 pre report

    Inventories:

    Crude: UP 2.8 mm on the back of very high imports at 10 mm/d
    Gasoline: up 1.2 mm
    Distillates: up 0.6 mm

    Demand
    Gasoline: 9.282 mm bpd, good level for this time of year
    Distillates: 3.895, bumped up nicely, unexpected.

    ….

61. EIA continued

    The rally in imports may be timing based as ships rushed to get to the LOOP fearing the spill might shut it down. That has not happened so far and does not look likely. I’d bet imports fall back in the next two weeks fairly sharply.

    …

62. EIA cont.

    Cushing jumped to what may be a new high, will go and check. Cushing was 36.2 mm barrels of storage, up 1.6 mm barrels.

    … that should put a cap on a run back to the recent highs for crude in the near future (until it backs off).

    All in all, not a pretty neutral report with products growing less than expected but crude building more on the back of the high imports number.

63. Crude down $2.60 now.

    BOP – no kidding re headline risk. Wondering how GS is coming along with their settlement proposal, that one is green again today.

64. Awkward Quote Watch:

    “I like having to raise our game to meet the standard of a BP (and STO and others big oil companies)” ~ Aubrey McClendon.

    There’s some words I would not have thought anyone would utter right now.

65. Nicky – S&P struggling with your 1170 level.

66. CHOBR green except for OII (CAM, HAL, OII, BP, RIG)

67. It looks like we should move through it Z. If we can move above 1177 and then 1181 the bears are going to get worried….

68. CHK call ending, very positive tone from the analyst crowd, better call than in several quarters.

    Word of caution on gasoline. This is the second week in which throughput at refiners rose and gasoline production fell. This fall, combined with benign gas imports allowed gasoline stocks to not grow as much as expected. I expect a snap higher on gasoline stocks with next Wednesday’s report.

69. VTZ – I think the real story on the dollar is that while the dollar index has been on a tear since April 15, gold is actually UP (in dollars) over that period.

70. Thanks much Nicky, we’re through it now, Mr. Market thinking time for a new color.

71. T Boone link, frustratingly slow to buffer from here;

    http://media2.foxnews.com/050410/050410_strat_TBooneSpecial_W700.wmv

    Left a post at the end of yesterday from an email I received, don’t know how factual.

72. Crude down $2 now, products off harder than I would have thought on that data. Crude should pay more attention to the S&P than them anyway for the rest of the week. Next week I may take puts on VLO post inventories.

73. 69 goes without saying for me… it’s managing to cling strongly to resistance levels too.

    Gold is making new record highs in euros and yen every day now basically.

    Even today it looks like it’s managed to fight it’s way back to 1172.

    Blastoff is approaching, when the dollar rolls and fear starts stacking.

74. When do stations really kick up that pre-Memorial day prestocking?

75. Jat = now.

    Getting on ATW call.

76. TAT flirting with $4-great pick, Z Glad its Turkey not Greeece!

77. Roger that Ski.

    ATW not saying anything that would make me want to dip a toe today. Good quarter but activity for recontracting rigs has been extremely slow.

78. Madison Wms on TAT this morning —

    TAT – MOU to acquire Zorlu Oil & Gas operations in Turkey for $100MM; assets include ~1.0MM net acres in the Thrace Basin & ~730k net acres in central Turkey (50% to 100% of 18 exploration licenses & 1 production lease), a drilling rig & other equipment; acreage is largely undeveloped; current production ~7MMcf/d +10MMcf/d awaiting pipeline connection— price equates to $5,882/flowing Mcf, a very good price, especially considering the positive gas price environment in Turkey.

    · Strategy – gain a strategic partner in Zorlu, one of the leading companies in Turkey & build on our presence in the Thrace Basin, obtaining acreage prospective for the shallow gas targets we have successfully developed in Edirne as well as deeper conventional and unconventional gas

    · Zorlu – 1) use $20MM of the purchase price for pipeline construction to connect the Amity and Petrogas licenses to local and national natural gas distribution points & 2) have the right to purchase 100% of the natural gas that TAT develops on the acquired licenses and will have the option to either receive a 5% net profits interest in new wells drilled on the licenses or a 25% participatory working interest, on a well-by-well basis

    · Financing – plans to finance the purchase thru bridge line of credit to be entered into between the Co & an affiliate of Mr. Mitchell, would bear interest at Libor plus 2.5%; for each $1MM drawn on the LOC, the Co would issue 100,000 common share purchase warrants to the lender, exercisable for 4 years & entitle the holder to purchase 1 common share for each warrant at an exercise price of $6.00/share

79. HK call about to start.

80. Z – would appreciate any posts from the HK call –

81. HK rolling through the intro, pretty impressive as usual. Talking more about oil than ever before. Floyd is not doing the call at least so far and two weeks ago he was adamant about them remaining a “gas company” and scoffed at others “going oily” . This guy, and I’m not sure if it is Stoneburner or not, said they going oily right now makes sense and they are pursuing oily opportunities as quickly as possible.

82. #80 – typing to fast – meant to add – thanks in advance.

83. 1520 – always!

    Looking through the deets of the EIA data at the same time.

    Would add that the big jump in distillate demand put it in the middle of the range for demand for this time of year. That’s pretty important because this has been hugging the lows for a long time now. If it lasts that’s a good sign that trucks have started rolling more and another piece of economy recovery evidence. Or, it could be end of season heating oil restocking following the end of the season as prices have fallen a bit.

84. Crude up over a buck since the EIA numbers, no panic there, but still off $1.80. Products still surprisingly low.

    HK Notes

    Hawkville: 235K net acres
    Blackhawk: 53K
    Red Hawk: 87K

    Added acreage at really attractive prices. EFS acreage almost as big as Haynesville for them now.

    Hayensville: they project that they catch up on cumulative production within a year on the restricted rate wells.

    …

    CHK going green.
    S&P thinking about it.

85. SWN nicely green.

86. HK Notes:

    Should have first Bossier well data soonish. They think they have 122,000 net acres that’s prospective for it.

    Eagle Ford Shale:

    We are moving toward the restricted rate procedure there as well. Their first well with SFY (reports tomorrow) will be a restricted rate due to infrastructure. They are trying a lot of things in the EFS to test best completion process with an eye towards maximizing recovery not rate. What a refreshing concept to hear them talk about. Also helps gas prices.

87. Hear ya, been strong all day.

    FST about to be too.

    S&P at 1174.

    HK Notes:

    EFS wells going to 6,500′ lateral length, up from I think about 5,000′ now.

88. HK Notes:

    Declined to comment on additional leasing (size or where) outside of the Haynesville and Eagle Ford.

    I find it interesting that they are moving just about all of the Haynesville existing and all of the new drilling to restricted choke and they are NOT reducing their volume growth estimates.

89. #88 – they have been quickening their pace – that may help make up part of the math on keeping volume up.

90. That and better well performance.

91. Nicky – do you think we ultimately see a full retrace to the highs in the USD when everybody and their dog was fleeing to 0% US bonds?

92. Wyoming – what prices are you seeing for ceramic per pound now.

    I think they said white sand was $0.30/lb, premium sand at $0.35 / lb, don’t know if that is RCS or something else, and that ceramic was above that.

    They are still working out whether they need the ceramic everywhere in the EFS. Saying availability can be an issue on the ceramic (still sounds like a green light for CRR as Bakken operators last week were saying they thought ceramic prop was a must).

93. Most names bouncing, some green. Note that EOG is still off big as was WLL (now green).

    Reminder that they have an analyst day on May 24, which sounds like it will have some new stuff.

94. 1175/1176 may provide some resistance.

    The bullish count:

    We have started wave v up to new highs this morning.

    Wave i of (i) completed at 1172. ii of (i) pulled back to 1166, i of (iii) is now underway to the 1176 area. We may then see a pullback in ii of (iii) to the 1170 area which would put in the right should of an inverted head and shoulders. iii of (iii) would then target 1192.

    All just a possible road map right now.

95. Floyd is a humorous old sod!

96. BB — that’s what Wife #3 thought too….

97. HK Notes

    Haynesville acreage – will be substantially held by mid 2011.

98. VTZ – the count I am looking at for the USD has it going to around 92. Not looking at fundamentals at all……

99. Those BOP talons appear to be sharp today! 🙂

100. (just couldn’t resist… )

101. RE 98 – I wanted the no fundamentals opinion. Thanks a bunch.

102. re 96 – so many comments come to mind … none of them my mother would like to see me type.

103. No need to do so now but at some time can you discuss the disconnect between cash flow and reported earnings of energy companies. A little insight as to acceptable debt/equity would be welcome as well.

104. Cargo – will address post lunch, remind me if I don’t.

     HK Notes:

     Capex probably flattish in 2011 vs 2010 at $1.3 to $1.4 B.

     I think I’ll be heavier here in terms of calls going into the analyst day.

     Cash flow positive projected for 2012.

105. KOG poking its head on up, earnings Friday there.

106. For you new folks please check out the tabs at up left including the ones like ZCAT, ZIM, ZLT which shows positions, the Reports tab which shows company specific reports and the Calendar

     http://zmansenergybrain.com/subscriber-data/calendar/

     which is useful especially during earnings.

107. HK call over, upbeat, analysts sounded fairly satisfied.

108. SSN and TAT both green, digesting deal news pretty well.

109. MMR – they officially appointed Moffett President and CEO and increased stock under the incentive plan. Hmmm, not really in favor of that move. Power consolidated in the hands of a fence swinger with even more incentive to push the stock harder. He’s a great gas finding dude, don’t get me wrong, but I don’t like the hype at times and the radio silence at others (like when they have a dry hole and don’t mention it via pr even as their minority interest partners have spilled the beans). Guess I’m just crabby that way. EXXI tomorrow and the focus should not be on Davy nearly as much as in the past I’d think.

     Grabbing lunch, back in 30 min.

110. Z: Sorry if I have asked this before. Is there a limit to the storage space at Cushing? I have seen what happens to NG when we get close to full. You must have been a juggler in another life. How you get all the info out on these busy days is beyond my capabilities.

111. Tom – yes, it’s physical tanks on the ground in Cushing, OK. There has been some construction of late so I don’t know the exact figures, but it should be above 40mm barrels now. Maybe up around 45 but not sure. It’s a pricing point for oil and only about 10% of regular stocks (not including SPR inventories), so you’d think at 10% it would not have much influence but when it is bloated it often puts a damper on things and it is very bloated at the moment (chart will be in the Thursday post as usual).

112. Cargo re 103

     A number of things make using cash flow superior to EPS when looking at the E&P business.

     First, it’s a cash flow reinvestment business. You have to plow cash back into it to keep the business running.

     Earning don’t tell you if the business is able to do this or not. Earnings remove non cash expenses (chief among them depreciation and deferred taxes). Because your DD&A rate is related to your reserve valuations it can be wildly different for different companies making apples to apple comparisons based on earnings difficult.

     Also, some E&Ps utilize full cost accounting while others are successful efforts, again making for wide variations in earnings.

     And then there’s the tax treatment for E&P operations that has certain advantages that result in deferred taxes, something that is taken out of earnings but added back for the CFPS calculation. So E&P accounting works to minimize EPS (as both current and deferred taxes come out of that number) and in the case of many smaller companies, they appear to be constantly running at loss and therefore you have no “E” to put in the denominator of the “P/E”. In E&P, negative income statement earnings are not necessarily indicative of an uneconomic concern. But if you have negative Cash Flow … well, now that’s probably trouble.

     On the debt/equity issue, that’s more open to user interpretation. I like to see net debt to book cap between 20 and 50% but that’s not a hard and fast level. Say you are a gas company and gas prices fall substantially. You may have to take an impairment which flows through the income statement as a non-cash charge (hitting EPS but not CFPS by the way) and onto the balance sheet in the form of a ding to retained earnings. Do that often enough and your equity will be reduced substantially, giving you a high debt to equity ratio even if you recently had a more normal looking number. Guys like SD were hit by this. I’m not saying they didn’t pay up for their acreage (maybe too much given where gas is now) but I am saying that because you don’t get to write those same reserves back up (in the event gas prices rise) … there is no gain that flows back through the income statement and pumps up retained earnings. All I’m saying here is you have to keep a careful eye on debt/equity ratios unless you know their history.

     Lemme know if that takes care of your questions.

113. White House on the tape saying they would back a “big rise in rig liability”.

114. Hedline misleading though, as the story says this refers to the current $75 mm “economic liability cap”

115. Have not frac’d in over a year. Working on flowing wells. The ceramic prices I have requested were not domestic either and are way out of norm, plus small volume for skin frac types of designs.

116. Z: 113 What does that mean?

117. OK thanks, TEXW, same question to you.

     Tom – see 114.

118. Whilst I am not dismissing the move up today as maybe being the start of something bullish it is coming on a contraction in volume which rather favors it will fail. If it is going to do so it won’t get above the 1185/86 area.

119. Wyoming’s comment posted last night:

     Before you read further, I run by one simple rule:

     BELIEVE HALF OF WHAT YOU SEE AND NOTHING OF WHAT YOU HEAR.

     On a serious note, this is the speculative comments from an email I received. I’ll just paste this one as we are at the end of a thread. Matches up with a conversation I had with one of our consultants as he worked with BP in another basin. His basic comment was that it was a tapered 9 5/8″ string back to the wellhead and that they had used water in between their plugs (something is odd and why this is hard to understand without all the information). He also said that the mud engineer was telling everyone that there was a lot of mud returning and that the alarms were being turned off (also an odd comment). Anyway, here is the unedited text from the email:

     ——————————–

     This well had been giving some problems all the way down and was a big discovery. Big pressure, 16ppg+ mud weight. They ran a long string of 7″ production casing – not a liner, the confusion arising from the fact that all casing strings on a floating rig are run on drill pipe and hung off on the wellhead on the sea floor, like a “liner”. They cemented this casing with lightweight cement containing nitrogen because they were having lost circulation in between the well kicking all the way down.

     The calculations and the execution of this kind of a cement job are complex, in order that you neither let the well flow from too little hydrostatic pressure nor break it down and lose the fluid and cement from too much hydrostatic. But you gotta believe BP had 8 or 10 of their best double and triple checking everything.

     On the outside of the top joint of casing is a seal assembly – “packoff” – that sets inside the subsea wellhead and seals. This was set and tested to 10,000 psi, OK. Remember they are doing all this from the surface 5,000 feet away. The technology is fascinating, like going to the moon or fishing out the Russian sub, or killing all the fires in Kuwait in 14 months instead of 5 years. We never have had an accident like this before so hubris, the folie d’grandeur, sort of takes over. BP were the leaders in all this stretching the envelope all over the world in deep water.

     This was the end of the well until testing was to begin at a later time, so a temporary “bridge plug” was run in on drill pipe to set somewhere near the top of the well below 5,000 ft. This is the second barrier, you always have to have 2, and the casing was the first one. It is not know if this was actually set or not. At the same time they took the 16+ ppg mud out of the riser and replaced it with sea water so that they could pull the riser, lay it down, and move off.

     When they did this, they of course took away all the hydrostatic on the well. But this was OK, normal, since the well was plugged both on the inside with the casing and on the outside with the tested packoff. But something turned loose all of a sudden, and the conventional wisdom would be the packoff on the outside of the casing.

     Gas and oil rushed up the riser; there was little wind, and a gas cloud got all over the rig. When the main inductions of the engines got a whiff, they ran away and exploded. Blew them right off the rig. This set everything on fire. A similar explosion in the mud pit / mud pump room blew the mud pumps overboard. Another in the mud sack storage room, sited most unfortunately right next to the living quarters, took out all the interior walls where everyone was hanging out having – I am not making this up – a party to celebrate 7 years of accident free work on this rig. 7 BP bigwigs were there visiting from town.

     In this sense they were lucky that the only ones lost were the 9 rig crew on the rig floor and 2 mud engineers down on the pits. The furniture and walls trapped some and broke some bones but they all managed to get in the lifeboats with assistance from the others.

     The safety shut ins on the BOP were tripped but it is not clear why they did not work. This system has 4 way redundancy; 2 separate hydraulic systems and 2 separate electric systems should be able to operate any of the functions on the stack. They are tested every 14 days, all of them. (there is also a stab on the stack so that an ROV can plug in and operate it, but now it is too late because things are damaged).

     The well is flowing through the BOP stack, probably around the outside of the 7″ casing. As reported elsewhere, none of the “rams”, those being the valves that are suppose to close around the drill pipe and / or shear it right in two and seal on the open hole, are sealing. Up the riser and out some holes in it where it is kinked. A little is coming out of the drill pipe too which is sticking out of the top of the riser and laid out on the ocean floor. The volumes as reported by the media are not correct but who knows exactly how much is coming?

     2 relief wells will be drilled but it will take at least 60 days to kill it that way. There is a “deep sea intervention vessel” on the way, I don’t know if that means a submarine or not, one would think this is too deep for subs, and it will have special cutting tools to try to cut off the very bottom of the riser on top of the BOP. The area is remarkably free from debris. The rig “Enterprise” is standing by with another BOP stack and a special connector to set down on top of the original one and then close. You saw this sort of thing in Red Adair movies and in Kuwait, a new stack dangling from a crane is just dropped down on the well after all the junk is removed. But that is not 5,000 ft underwater.

     One unknown is if they get a new stack on it and close it, will the bitch broach around the outside of all the casing??

     In order for a disaster of this magnitude to happen, more than one thing has to go wrong, or fail. First, a shitty cement job. The wellhead packoff / seal assembly, while designed to hold the pressure, is just a backup. And finally, the ability to close the well in with the BOP somehow went away.

     A bad deal for the industry, for sure. Forget about California and Florida. Normal operations in the Gulf will be overregulated like the N. Sea. And so on.

120. Wyoming – Thanks for sharing that, hadn’t gotten to read it yet. I’d never thought of putting one BOP on top of another. Seems tricky.

121. 119 – wow

122. Housekeeping watch: If you are new to the site let us know how you found out about us. Send an email to Petra at zmanadmin@gmail.com

123. JB – can you take a shot at UUP, thanks much. Specifically wondering about the potential for a near term rollover there.

124. Z-thanks for the explanation. It outlines just how complicated it is to evaluate this sector. I continue to appreciate your talents, hard work, and insight. And all contributors to this ongoing dialogue, for that matter, from the kind hearts to the crusty. You know who you are.

     Where can I find cash flow information? Google finance gives me EBITDA but not CF.

125. Cargo – I pay for it. Forbes’ site I think has a link to get current year CFPS.

     EBITDA works just as well though as cash flow, you just use TEV in the numerator. TEV = market cap + debt – working capital. It’s a little more trouble but its what I use when comparing two E&P’s one with a lot of debt and one with a little. It backs their cost of financing out for both but keeps the debt in so you can see how they stack up better.

126. SM continues to ignore the Greek Fire. That’s the Niobrara upcoming catalyst moving it in part. Would like to see little Samson pin down the timing of their Niobrara program now that they have more cash on hand.

127. Sand-.10$/lb

     Resin Coated Sand-.30$/lb

     Light weight ceramic-.35$/lb

     ISP (int strength prop)-.40$/lb

     Bauxite (highest strength, alum ore)-.50$/lb

     ASSUMING you can even get your hands on any of it, Carbo is SOLD out for who knows how long!

128. SFY – reports tomorrow, better than coin toss they have upside in their numbers and that they say interesting things about the EFS and their efforts Lake Washington. Not wowser performance this quarter from EFS wells but that’s in the market already, but good plans and can talk up their oiliness.

     Thanks TEX. CRR running as hard as possible to keep up. Hmmmm.

129. Z: Are you surprised in the way HK and CHK are trading in light of the CC’s and market action?

130. Not really … not a lot of thought going into today’s trading in the bigger names especially. I think this is a bit of profit protection in the names that have run and a failure of buyers for names that have not due to market conditions. This too shall pass.

131. Move in oil is not encouraging for the broader market as it appears to be heading back towards the lows.

132. Re: #123 UUP. this is s tough one, not much data to work with, looking at the daily, UUP looks like it’s trending higher…all of the moving avg’s are turning up…the P&F chart is a bit sparse…dialing down to the 1/2 box size, you find resistance at $25.50 to $26, but I do not know if the modified box sizes are reliable with this ETF, dialing down near term on the 30 min, support is at about $24.25…

133. Nicky – yeah, back to where it was when EIA report came out, been trending with the S&P.

134. JB thanks, it’s the dollar index ETF so would the DX/Y be easier to look at?

135. ZTRADE – ZIM – EOG

     EOG – Still averaging in, took another (5) of the May $110 calls for $1.75, with the stock off $4.80 on the day.

136. Crude Oil…$WTIC technical developments on the P&F chart…this is an end of day chart, but you can see as of now, Oil is trading below trendline support…

     http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

137. In the case of both crude oil and the spx we could just be working on a wave ii retracement. So we could go all the way back to 1162 area.

138. Where did all of the raging bulls go from a whopping 2 days ago? They all couldn’t shutup about how amazing the recovery was, they were busy stumbling in front of eachother to parade onto CNBC.

139. Nikkei has been closed for 4 trading days for a holiday and I believe opens tonight. Futures are marked down over 400 from where it closed.

140. Thanks JB, voted. They tried and succeeded in closing at $80, which is key psychological support. Pretty weak looking indeed and there’s little reason to think crude won’t travel back to the mid to low $70s if the broader market continues to retreat. One offset would be the continued strong refinery utilization (for the way we’ve been looking at things for the last two years). This has added 1.2 mm bopd of demand in the last 7 weeks, which is a pretty sharp rally. If sustained into next week and we get those imports to back we could be in for a substantial draw down of crude stocks that would probably give crude a little support at this level.

141. RE: #140, Zman, thank you…

142. V – Hear ya. I took some profits on Monday and have been adding back to names on weakness but am not forging deeply into my cash at the moment as this market lacks confidence.

     re 139 – That’s what they get for going on vacation. Should be trailing U.S. market and not an indication of more pain for futures tonight but that’s not always the case.

143. I remain in the Recovery Camp. It’s just a sucky recovery with few to little non-govt jobs being created. But it is a Recovery. And nothing goes straight up from the bottom.

     Here’s a blurb from today’s Cross-Asset Class Strategist

     http://www.capmarkets.com/ViewFile.asp?ID1=136277&ID2=413596877&ssid=1&directory=6571&bm=0&filename=05.05.10_New_Credit_Crisis_or_Trading_Bonanza.pdf

     it doesn’t help that much, but it will take your mind off the stock mrkt for a few minutes.

144. re 142 – I have often pointed out how overdone the Nikkei futures are. I will be surprised if it opens down 450 but you never know I guess.

145. Giant Box Being Loaded on Boat Bound for Gulf
     2010-05-05 18:38:43.523 GMT

     By HARRY R. WEBER
     Port Forchoun, La. (AP) — A 100-ton contraption to help funnel out oil spewing from the bottom of the Gulf of Mexico was loaded onto a boat Wednesday so it could begin its journey to the leak site about 50 miles off the Louisiana coast.
     The giant-concrete-and-steel box is the best short-term solution to bottling up the disastrous oil spill that threatens sealife and livelihoods along the Gulf Coast.
     BP spokesman John Curry said it would be deployed on the seabed by Thursday and hooked up to a drill ship over the weekend. The boat, a 280-foot vessel named the Joe Griffin, was expected to start its trip later Wednesday.
     The box is the latest idea engineers from oil giant BP PLC are trying after an oil rig the company was operating exploded April 20, killing 11 workers. It sank two days later.
     BP is in charge of the cleanup and President Barack Obama and many others have said the company also is responsible for the costs.
     BP capped one of three leaks at the well Tuesday night, a step that will not cut the flow of oil but that BP has said will make it easier to help with the gusher.
     Two satellite images taken Wednesday morning indicate oil has reached the Mississippi Delta and the Chandeleur Islands off the coast of Louisiana.
     It’s not clear whether the oil is on shore, but it’s very close, said Hans Graber, director of the University of Miami’s satellite sensing facility.
     U.S. Coast Guard Lt. James McKnight said crews remained at the Chandeleurs on Wednesday after officials got a report of oil coming ashore, but they have not located it.
     “They’re sitting there, basically, waiting for the first signs of any kind of a sheen to touch the islands,” he said.
     Graber said the images also show oil drifting south, toward the Loop Current, which scientists say could carry it toward Florida and the Florida Keys. The northern edge of the current may have already picked up some oil.
     Florida officials fearing tourists will cancel their vacations are trying to quash rumors that oil is already washing up on beaches there.
     “We are not two or three days away from it hitting the shore,” said David Halstead, Florida’s emergency management chief. “The beaches are still open.”
     The long-term effects of the spill on wildlife are not yet clear. Dead endangered turtles have been washing up on Gulf Coast beaches, but they have no signs of oil and federal fisheries officials are investigating whether aggressive shrimpers may have killed them.
     Efforts to stop the oil before it gets to shore picked up Wednesday. Coast Guard crews said they were preparing to corral some and set it on fire, which they last tried April 28. A 28-minute burn then removed thousands of gallons, but weather had not allowed them to do it again. Waves and wind were calm Wednesday.
     In Plaquemines Parish, near the southern tip of Louisiana, officials loaded absorbent boom shortly after dawn to take out to the mouth of the Mississippi River. The barge will be used as a distribution point for local fishermen to lay the boom around sensitive marshes.
     At a nearby marina, local shrimpers planned to use their boats to put down boom as part of a program BP is running.
     The Coast Guard said officials planned to send out about 80 vessels from Biloxi and Pascagoula, Miss., and Orange Beach, Ala., primarily to handle booming. Two Coast Guard cutters would also conduct offshore skimming operations. Crews in Mississippi are picking up debris from beaches to make cleanup easier if oil comes ashore.
     In all, about 7,900 people are working to protect the shoreline and wildlife, and some 170 boats are also helping with the cleanup.
     A rainbow sheen of oil has reached land in parts of Louisiana, but forecasts showed the oil wasn’t expected to come ashore for at least a couple more days.
     “It’s a gift of a little bit of time. I’m not resting,”
     Coast Guard Rear Adm. Mary Landry said.
     In their worst-case scenario, BP executives told members of a congressional committee that up to 2.5 million gallons a day could spill if the leaks worsened, though it would be more like
     1.7 million gallons. In an exploration plan filed with the government in February 2009, BP said it could handle a “worst-case scenario” it described as a leak of 6.8 million gallons per day from an uncontrolled blowout.
     Containment boxes have never been tried at this depth — about 5,000 feet — because of the extreme water pressure. If all goes well, the contraption could be fired up early next week to start funneling the oil into a tanker.
     “We don’t know for sure” whether the equipment will work, BP spokesman Bill Salvin said. “What we do know is that we have done extensive engineering and modeling and we believe this gives us the best chance to contain the oil, and that’s very important to us.”
     The rig was owned by Transocean Ltd. Some of the surviving workers who were aboard when it exploded are suing that company and BP PLC. In lawsuits filed Tuesday, three workers say they were kept floating at sea for more than 10 hours while the rig burned uncontrollably. They are seeking damages.
     Guy Cantwell, a spokesman for Transocean, defended the company’s response, saying 115 workers did get off alive. Two wrongful death suits also have been filed.
     While officials worked on cleanup, the long wait took its toll on nerves and incomes.
     Perdido Key, a barrier island between Pensacola and the Alabama state line with sugar-white sand studded with condominiums, likely would be the first place in Florida affect by the oil spill. Perdido — Spanish for “Lost” — got a sniff Tuesday morning of what may be in store.
     “You could smell the smell of it, real heavy petroleum base,” said Steve Owensby, 54, a maintenance man at the Flora-Bama Lounge abutting the state line on the Florida side.
     The air cleared later, but Owensby’s 28-year-old daughter, Stephanie, who tends bar at the lounge, said some visitors have complained of feeling ill from the fumes.
     “It’s very sad because I grew up out here,” she said. “I remember growing up seeing the white beaches my whole life.
     Every day I’ve been going to the beach … a lot of people are out watching and crying.”

146. Re 145. That’s next door to where I was last month. Wow, that just sucks.

147. Okay so now the lows are being made on lighter volume that is actually more bullish than bearish! Still don’t want to see a close below 1165.

148. Thank you, Nicky.

149. Story on oil clean up scenarios and interesting if you’ve never looked at a Gulf of Mexico platform map.

     http://news.yahoo.com/s/livescience/20100504/sc_livescience/hurricaneseasoncouldhaltoilspillcleanup

150. EOG at another new LOD, down about 10% in 2 days (since earnings). They were not bad numbers, maybe some of that was in the stock prior to the press release but there was little in there that warranted this kind of pullback. Couple of things at work: not a lot of energy buyers at the moment to offer support although I am seeing some occasional spiky/sporadic size buys. The other thing is hot money has been playing the group, maybe more than I thought of late and they punt based on charts and momo.

151. Pragmatic Capitalist: IBD downgrades to: “market in correction,” lowest rating.

152. Thanks Pati – those Oneil boys are pure chartists. Curious to know where they were on Monday in terms of rating.

153. Anyone have a thought why the upstream MLPs are getting blasted? Most don’t go ex. dividend until Fri.

154. re 153 good question, posed it earlier and they are worse still. Volumes are massive. Almost like a fund is cleaning house.

155. XEC. Reports before the open Friday with CC at 12 central. Finally announced a granite wash horizontal well, this from press release: Texas Panhandle drilling in the quarter totaled five gross (4.4 net) wells: four Granite Wash and one Morrow. Cimarex drilled a horizontal Granite Wash well, the Huff 16-5H (41.5% working interest) in southern Hemphill County, which was brought on production in early March and averaged 20 MMcfe/d (18 MMcf/d of gas and 400 barrels per day of oil) for the first-30 days. They also announced that they had offset discovery in South Texas in new reservoir 9 Dragons. These are fantastic wells. Here is the address for those with an interest. Options are hard on this security but a nice growth stock for your portifolio if you need one….http://phx.corporate-ir.net/phoenix.zhtml?c=136094&p=irol-newsArticle&ID=1418226&highlight=

156. Thanks West,

     Seen anything on an FH Petro well in E. Montana?

157. Moody’s warning that it may downgrade Portugal.

158. #152: Don’t know on Monday.

     IBD Big Picture: “Tuesday’s losses added to the market’s recent surge in institutional selling, giving the NSDQ its fourth distribution day. Leading stocks also took some hits as the IBD 100 tumbled 3.2%. All the accumulated selling suggests that the market is heading into a correction. You never know if it will be an intermediate pullback or something larger… The last correction, which began in January, lasted just over a month, with the NSDQ falling 9.7%.”

159. Thanks Pati.

160. Z, that well and the caret are tighter than anything . Probably lots of science going on. Who do u think would benefit the most if it were successful?

161. HK upgraded to BUY at Hapoalim….

162. West – BEXP

163. Isle – thanks, good CC, tougher market.

164. I thought this was fairly mind-boggling (I have to think the Euro is finished-the Germans by themselves will not prop up Greek pensions and extensive vacations much longer):

     http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html

165. beerthirty

166. 1165.39

167. MLPs: One “neo-alarmist” guessed worry about the GGG pulls a Canada and changes the tax code, but adds he has not heard anything new there.

168. someone put exxi in a concrete box

     any news?

169. RE:168 Brilliant

170. E21 — all I heard recently was that Schiller was very upbeat at Monday’s dinner… and he laid to rest the misconceptions that Davy Jones is too technically-challenging to ever produce. And my friend went into that meeting with the concept that is was… so he was not easily convinced. But convinced, he was.

171. MLPs; maybe this is just another event similar to the BPT and HGT sell-off (although in a different setting; or maybe my brainis fried on the spill and Greek bailoits)on march 19th; that seemed to me a fund dumping its positions.

172. SandRidge Energy, Inc. and Arena Resources, Inc. Schedule Special Stockholder Meetings for June 8, 2010; Set Record Date as May 5, 2010Last update: 5/5/2010 4:05:00 PMOKLAHOMA CITY and TULSA, Okla., May 5, 2010 /PRNewswire via COMTEX/ — SandRidge Energy, Inc. (SD) and Arena Resources, Inc. (ARD) today announced June 8, 2010 as the date scheduled for their respective upcoming special stockholder meetings. On April 3, 2010, SandRidge and Arena entered into a definitive merger agreement providing for the merger of Arena with a subsidiary of SandRidge in exchange for SandRidge common stock and cash. At their respective special stockholder meetings, SandRidge stockholders will vote on, among other items, the issuance of SandRidge common stock to Arena stockholders pursuant to the merger, and the Arena stockholders will vote on the merger with a subsidiary of SandRidge. Both SandRidge and Arena have fixed the close of business on May 5, 2010, as the record date for the determination of stockholders entitled to receive notice of and to vote at their respective upcoming special stockholder meetings. In addition to stockholder approvals, the transaction is subject to the joint proxy statement/prospectus filed with the Securities and Exchange Commission (“SEC”) being

173. Saw some headlines about the Coast Guard ordering drillers to test their emergency equipment in the GoM. That was about the time E21 took the last leg down. But just think there are no buyers right now.

     BP on the tape with an update… saying 60,000 b/d is the worse case. WELL… that is a pretty WORSE CASE all right. That would be pretty darn awful.

     48 hours to set the containment box. It will be interesting, to say the least.

174. End of Day Overview:

     · Market Update – despite some intra-day volatility and a brief break into positive territory, it was more of the same today as far as risk assets go – equities for sale, the euro moves lower, CDS widens on European sovereigns, and US TSYs/German bunds rally higher. The SP500 ended -7.7 points/0.65% to 1165, off its worst levels (we hit 1158 in the afternoon) but also well off its highs (we rallied into the green and hit 1176 briefly). Europe remains the market’s big concern and there was nothing overnight that really changed the equation – there remain worries that Greece’s problems aren’t unique to it and in fact are shared by some of its European neighbors (namely Portugal and Spain; Moody’s came out today and put Portugal on watch for a downgrade). The actions taken by European officials to tackle the Greek problem (the IMF/EU bailout package) haven’t calmed the crisis and the fear is may have to be repeated for others. The ECB does have tools to take dramatic action (see below), but for the moment it appears to be set on taking more gradual moves. The euro continues to sink and has sliced through several important technical levels; the major FX crosses remain very volatile and the moves are starting to resemble tech stocks instead of historically staid currencies. For much of the last week, US equities were spectators to what was occurring in Europe, but lately some domestic liquidity measures are starting to deteriorate (see the 3-month FF/LIBOR spread on Bloomberg – USBG1 CRNCY – it has spiked in the last week); the strain of dollar funding markets is one of the reasons some anticipate the ECB and Fed to re-open swap lines. As busy as Europe has seemed, there are a bunch of huge catalysts to come (ECB Thurs, UK vote Thurs, German parliament vote Fri, and more). Despite Europe dominating the headlines, there it a lot else going on. Goldman’s Wealth Management Group held a client call w/CEO Blankfein today although didn’t reveal anything incremental on the situation occurring at the company. There are a slew of amendments being considered in the Senate as the Dodd bill gets debated (voting commenced late on Wed and senators approved a measure to ban taxpayer-funded bailouts; this was widely expected and means more for bank credit than it does equities). On the economics front, there were two positive jobs data points today (the Challenger Survey and the ADP estimate), although ironically the brighter this Fri’s BLS reading is, the more pressure it could place on the euro. Treasuries are catching a meaningful bid (10yr yields fell to a multi-month low), in large part b/c of a flight to quality trade, but also b/c of the US deficit picture is brightening (according to Reuters, the Treasury on Wednesday cut the size of some debt offerings for the first time in three years and reduced its overall planned sales for its upcoming quarterly refunding, citing a growing economy).

     · Desk Color – Activity in US equities remain relatively quiet – there was a lot of short covering this morning that caused the rally into the green, but no “real” buying was behind that move. On the positive side, larger long-only vanillas haven’t been sellers over the last few weeks but really haven’t been looking to step in on the weakness either. The buying that is occurring is related to covering or from quicker traders looking for 24-48 hour long exposure.

     · Equity sectors: Defensive sectors were the clear outperformers today. The market was led by staples, up 0.4% as investors put money to work in lower risk assets. Healthcare also caught the defensive bid as the only other sector in the green, led by managed care and services. Telecoms followed the same trend, finishing off just 0.2% on strength in Q and S. Financials acted fairly well today, off just 0.4%, thanks to strength in non-life insurers and regional banks. Tech was in line with the tape today, as strength in internet names were offset by weakness in semis and softwares. Utilities lagged the tape a bit today, unable to catch the safety bid on weakness in AES and EQT. Materials ended off 0.75%, lagging the tape on weakness in chemicals and metals as many commodities fell towards or through their 200-day moving averages. Discretionary and industrials were both off close to 1.5% as investors turned on the higher-beta cyclical names in an effort to take risk off the table. Within discretionary, NWS’ earnings hit media hard and it looked like the selling bled into other related groups (like hotels). Energy was the weakest group in the market, falling 1.5% as crude plunged $3 to below $80. The group continues to be for sale over the Gulf spill as estimates for the amount of the spill continue to rise.

     · Best Performing sp500 stocks: CLF, EK, ICE, XL, GILD, Q, CAH, MI, ESRX, LXK

     · Weakest performing: HOT, MA, NWS, EOG, ADSK, WHR, PCLN

     · Commodities: Commodities finished the day mixed. Crude Oil fell from its intraday highs to close around $79.70, down ~3.7%. Natural gas strengthened a bit late in trading, but hit some resistance around the $4 level. Copper traded flat after coming off its morning lows and ended up ~1.15%. Gold ended the day trading near its highs around $1175, up about ~0.5%.

     · FX: USD (DXY) came off its midday lows and rallied into the bell to finish north of $84. The dollar also strengthened into the bell vs. the Euro to close up ~1.30%. The dollar came off its lows of the day vs. the pound to end up ~0.3% The dollar & euro finished close to their lows of the day vs. the yen, dropping ~0.9% and ~2.1% respectively.

     · Corp. Credit: Corp. Credit lagged equities, especially IG. IG sold off in the latter part of trading to finish out 6 3/4 bps. HY ended up dropping 1 ¾ of a pt.

     · Treasuries: The 2s traded flat after coming off their morning highs and ended up yielding 86bps. The 10s weakened midday, but rallied a bit into the close to yield 354bps. The 2-10 year spread flattened a touch from yesterday to yield 267bps.

175. E21 — sounds like they still have a pipeline issue in one of their producing fields. Exxon barge or work platform crunched down on the line last month. Will take to June to fix, but removes 2.5k b/d from their 29k boe/d production for a while. That could be why stock was weak into the close…

176. E21 — on a more positive note, I expect they will be about to say something about the progress of Blackbeard East on the call tomorrow.

177. GDP on the tape missing on top and bottom line, blaming some completion delays and promising to get oilier by year end.

178. EXXI results out

179. http://www.apegga.org/Members/Presentations/AC2010/ThompsonPresentation.pdf

     Updated oil sands presentations.

     Final slides show all the projects approved, announced, in construction and operation.

180. EXXI on the tape, revenue and EPS ahead, but EBITDA woefully short of the Street. Four words: Learn How To Guide.

     Nothing new on Davy
     Blackbeard East is below 15000′ headed to 30000′

     Volumes due to the pipeline rupture are curtailed through July, shouldn’t be news.

     Volumes were climbing as they exited the quarter.

181. EXXI

     If EPS of 0.18 is ahead of what is being reported as consensus of 0.14, how could EBITDA be short ?

182. CLB CEO just did a killer interview on everybody’s favorite……Cramer….lol….but it is worthy in this case. TAT

183. Thanks ELI, will tape tonight.

     Pack – Was hunting that divergence done. It appear to have been a much lower tax rate this quarter than last.

     I get CFPS was 1.12 vs the Street’s 1.20 as well.

     EBITDA was $87mm , Street was $95 mm

184. The difference in EBITDA should be the pipeline-impaired barrels. Also, E21 will be able to ship the affected barrels through the alternate pipeline they are building. This pipeline is expected to be finished by the end of June.

185. Thanks BOP, it’s only a hiccup I know, but one they could have steered the Street better on in the last couple of weeks when the analysts faxed /emailed in their models.

186. I think Duane was looking for close to $100mm in EBITDA… don’t know why he didn’t take the pipeline volumes into account.

     I said on Monday night (or Tues morning, can’t recall) that Schiller was hinting to the Monday Dinner Crowd that the quarter would be “good.” That usually spells “RUN AWAY!!!” I just hate it, when i’m right sometimes.

     That said, stock hammered and longer-term outlook still on track. I hate the volatility (would love it, if stocks only went one way), but love the prospect of the end-game valuation.

187. Still, it’s easier to forgive something like an infrastructural snafu, than it would be something like runaway decline rates, lol.

188. good comments Z, BOP.

     At least we all were able to get some cheap shares if we wanted ’em.

     Just hope they don’t get cheaper.

189. Pack – just think, if you only cared about Revenues and EPS you’d not have a care in the world as you turned in tonight. Maybe no one will pay attention to that stuff tomorrow either.

190. Love the pro-forma daily production rate… 27k + 2.4k (pipeline barrels) = 29.4k boe/d. That is pretty darn close to the Happy Dance Threshold for me. And it sounds like, with their summer drilling program and pipeline repairs/construction, they should be at that rate by the time they report the next quarter (which is their fiscal year end). So, all-in-all, OK with the quarter.

     Now it’s up to Schiller to lay out on the call why it’s GOOD to be a shelf E&P company with ZERO exposure to the deep offshore stuff and 68% oily production.

     Give ’em HECK tomorrow, John-Boy!

191. My futures app is acting up, anyone have a good website with S&P futures on it?

192. http://www.bloomberg.com/markets/stocks/futures.html

193. Thanks Pack.

194. BedTime Market Strategist (without the referenced charts)

     Dollar Dazed.

     Today’s trading action in the United States was as straightforward as it gets. Bulls tactically retreated as the European Sovereign Debt crisis remained the center of investor attention. The uncertainty and lack of investor conviction resulted in the equity market taking its key cues from the movement of the Euro in the currency market. The first chart below illustrates the intra-day relationship between the S&P 500 futures and the Dollar Index since midnight last night. The two have reverted back to the “mirror-mirror” relationship that was so dominant over the past couple of years. The Euro is 57% of the Dollar index, and every time the Euro weakened, the Dollar strengthened. The Euro registered its session low around 9am EDT. The lows in the U.S. Equity market, Crude and Gold were registered shortly afterwards. As the Euro bounced, so did U.S. assets. Interestingly, when the Euro trended back towards its lows, divergences emerged. Gold sustained all of its gains from the bounce to close on its highs. The S&P 500 sacrificed approximately half of the gains from the intraday bounce, while Crude essentially traded all of the way back off to its lows. All in all, we would have to note that this was fairly decent trading action considering the circumstances. Crude getting knocked down is always a plus for the economy. More importantly, once the Euro established a technical level, equity buyers materialized in the stock market. Needless to say, this story has a few more chapters before it is finished. Although the day’s action exhibited some underlying strength, we expect continued volatility going into Germany’s Parliament vote on the Greek aid package.

     Considering the influence the Euro is exerting on U.S. assets, it merits additional focus. Although we have no love lost for the fundamental standing of the Euro, it is worth noting the currency is approaching two very key support levels. The second chart below highlights the key 1.25 support level which coincides with the October-November 2008 and February-March 2009 bottoms the currency made versus the Dollar. Remember (how could anyone forget) those were key levels/bottoms in the U.S. equity market during the crisis. The irony is that the flight to quality bid was largely the result of problems emanating from the U.S. Obviously, today the problems are originating from Europe. That distinction is a key one because when that previous flight to quality occurred, global risk assets were sold and the currency was converted into Dollars and Treasuries were viewed as the only safe place to be. Fourteen months later, investors also have the alternative of a U.S. equity market trading less than 14.5x this year’s still rising earnings, estimates. Amidst the global uncertainty, it is not overwhelmingly compelling yet but should another notable down leg materialize, the situation will get very interesting. The Euro also has a major support level at the 1.20 level where it hovered for the second half of 2005. Ideally, as this situation unfolds over the next few sessions, an opportunity will arise if the Euro hits the 1.25 level in conjunction with a market event, i.e. German vote, U.S. Jobs report or something of a similar nature. The combination of events could/should trigger a reversal of the recent trends.

195. An older Canadian friend mused about the macro currency situation and concluded the Euro could go to parity with the dollar, fwiw. (Might make me want to visit Europe soon.)

196. RMD — didn’t the euro start life around parity with the USD… then go below for a while? Like 88c? Or, am i mis-remembering history….

197. nah… it started about 1.18 and migrated down to 82 1/2 cents. As i recall, the euro didn’t have the most stellar of beginings. Seems we are headed back to Square One again.

     Everything cycles, doesn’t it.

198. 196 good memory; I skied at Whistler in late Feb-March when the Can. $ was .86 and had to buy a new pair of high end skis: skis, bindings, mounting plus tax was ~ $380. Still using them, what a deal.

199. RMD try 10 years ago when the CAD was 0.65 of a USD.

200. The US is not in better shape than Europe and if it is… BARELY.

     Let’s get that thought out of our system.

     Maybe in the short term the US banks have an easier time bankrupting smallers countries by running their debt into the ground, but the US is going to the the biggest and hardest to fall.

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