07
May

T.G.I.F.

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Market Sentiment Watch: Extra jittery. I won't cover yesterday's market discombobulation here as we had exhausted that thread by the time we hit comment 300 last night. I rarely agree with Cramer but he was spot on when he called the plunge not real. I was able to nab some discounted KOG shares during the turmoil. On to relevant stuff. Payrolls this morning are providing less of a bounce than one would expect with stronger than expected job adds as the unemployment rate also rose.   The Senate rejected rules last night that would have limited bank size and the amount of debt on their balance sheets so that may provide an uplift to the financials today. Overseas, Germany voted to aid Greece after all although its more evident now that Greece is just the first of several dominoes that will need a fresh injection of Deutsche Marks euros. In energy land earnings announcements slow to only three I really care about (SD, KOG, and XEC) all highlighted in the stuff section.

 

Ecodata Watch:

  • Non farm payrolls: +290,000 vs expectations of +186,000
  • Unemployment: 9.9% vs 9.7% expected.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - KOG , SD, XEC
  5. Odds & Ends

Holdings Watch

ZCAT (Zman Catalyst portfolio)

  • $9,500
  • 78% Cash
  • Yesterday’s Trades:
    • None

ZIM (Zman Inefficient Markets portfolio)

  • $23,300
  • 62% Cash
  • Yesterday’s Trades:
    • KOG - Bought 1,000 shares for $3.61 after what could best be described as a very bad market discombobulation. See Earnings review in Stuff section below.

 

Commodity Watch

Crude oil dropped $2.86 to close at $77.11 yesterday, it's third 3+% in as many days.   This morning crude is trading up slightly (was up a buck early but sold off after payrolls)


Natural gas slid 6 cents to close at $3.93 yesterday after the EIA reported a slightly bigger than expected injection into gas storage (see comments on near term gas prices in the next section below). This morning gas is trading up 3 cents.


Natural Gas Storage Review


ZComments: Late Spring weather is starting to dampen the injections to something closer to seasonal norms. I think a rollover in the rig count and the continued string of capex shifts by the onshore E&P crowd toward oil, and potentially delays in drilling schedules offshore (see Interior Secretary Salazar comments here), could lend slightly support to natural gas in the near term, giving us a fairly solid floor at four until the summer heat and viable threats from storms set in to bridge the gap between now and when supply data start to actually decline.


 

Stuff We Care About Today

 

KOG Reports OK Quarter

The 1Q10 Numbers:

  • Production of 938 BOEpd (96% oil) vs:

    • up 20%, from the 782 BOEpd of last quarter
  • Revenue of $5.7 mm vs $7 mm estimate
  • EPS of $0.01 vs $0.015 estimate
  • EBITDA of $3.3 mm vs $4 mm estimate

Highlights:

  • Two recently announced bigger IPs for them that came in at 1419 and 1495 BOEPd had respectable first 30 days average production of 742 and 635 BOEpd respectively.
  • Three more wells to complete in 2Q
  • Planning to spud first of four wells from a single pad later this month. One of these wells will be their first Three Forks well.
  • Hedges: Now a small slice, plan to grow it.
  • Balance Sheet vs Capex:
    • They probably have $45mm left to spend this year. put up against that $10 mm in cash, some prepaid tubulars and other equipment and some prepaid drilling costs totaling about $5.
    • That leaves a gap of $30 mm for cash flow to cover.
    • Maybe they do $20 mm rest of the year, that leaves $10 mm, which could be taken on the long awaited revolver once it is in place. I’d figure a small deal, say 5 mm shares at $4+ would make sense any time as well, preferable after they get results back from their first test of the TFS.

Nutshell: Not a lot to talk about in terms of operations but management will give better color on the call. Growth continues and it's very early here so calling any of those numbers misses is pretty much rounding error given the small size. The trends are moving in the right direction. Would like to hear what current production is as it should be above 1,500 BOEpd now. Obviously funding this and next year's budget is an issue with a small gap apparent currently for 2010 so questions about when the revolver will be in place will be asked by me or someone else.

Conference Call: Today, 11 am EST.

SD 1Q10 Results Miss Mark; Cuts Guidance and Talks Up Oil But Does Have Some Nice Discoveries

The 1Q10 Numbers:

  • EPS of $0.09 vs $0.18 estimate
  • EBITDA of $141.2 mm vs 168 mm expected

Highlights:

  • Makes two Pinon field discoveries that aren't full of CO2 too, which is sort of refreshing.
  • Talks up new oily profile (aren't we all?) by ramping rigs in the Permian. Oil rigs jumped from 5 in the 4Q to 13 now.
  • Lowers guidance ... again, but its not necessarily bad news as the reduction in total company production from 130 to 120 Bcfe is offset partially by the higher value barrels by the following:
    • an 11% in expected oil volumes and
    • a $60 mm drop in gas directed capex (7% reduction in total budget), which goes to $800 mm and gets the company to within a stone's throw of expected EBITDA.

Nutshell: OK, but not great quarter, good to see them finding some pure methane, would like to hear thoughts on the ARD acquisition because if they pull that off I'll be back long the name as they got it for a song.

Conference Call: Today, 9 am EST.

XEC Announces Strong Quarter; Boosts 2010 Guidance Substantially

The 1Q10 Numbers:

  • Production of 584.5 MMcfepd (67% gas) vs:

    • up 25% from 4Q levels
    • up 20% from 1Q09 levels
    • this blew out prior guidance of 515 to 530 MMcfepd (note that this big beat was pre-announced in April).
  • Revenue of $432.4 mm vs $429 mm estimate
  • EPS of $2.00 (ex item) vs $1.74 estimate

Highlights:

  • Guidance:

    • 2Q: 570 to 600 MMcfepd
    • 2010: 570 to 595 MMCfepd, or up 23 to 29%, vs prior guidance 12 to 17% growth
  • Operations were updated in a press release at the end of April so nothing new to add since that pr which showed strong results in the Gulf Coast and Permian and very strong growth in the Mid-Continent.
  • Production is relatively balance among all three regions, with apparent strong upside in all three.
  • Balance Sheet: Solid with debt to cap at 14%.
  • Valuation: Numbers will be going up but at present XEC trades at an inexpensive P/CF for 2010 of 4.9x and 4.4x 2011's estimate.

Nutshell: Very Solid. Not closely tracked by me to my chagrin but am quarter after quarter paying this one more attention. Look for a quick trade here in the ZIM today. Also look for this to become one of my more talked about names. Hats off to West for the constant attention on this one.

Conference Call: Today, 1 pm EST

 

 

Odds & Ends

Analyst Watch:

  • SFY - Wunderlich raises target $5 to $45
  • EXM - Upped to Outperform at Opco
  • RIG - Jefco cuts target $15 to $75, rating Hold
  • RIG - UBS cuts target $28 to $90, rating Buy

Housekeeping Watch: Searching This Site

Have been getting requests for a tutorial for searching the site.

A Note Before We Start: People use various browsers to get here but I'll use Firefox in my examples as that's what I use. If we have questions about others we'll get that figured out for you. For the first part, it should not matter which browser you are using.

1) Scroll to the top of the site. On the left side you should see a Search box, just above The Z Pages. 

2) Note on Specificity:  It's important to know that entering a ticker is pretty useless unless its one we don't speak about often as the search engine will bring back an extensive list which sort of defeats the purpose of the search.  For instance, a search for "WHX" will bring back 100 hits while a search for "WHX model" will yield relatively few hits.

3) Open Your Browser's Find Bar. I leave mine open all the time as I can quickly scan press releases for terms like Niobrara or guidance or outlook. Anyway, in Firefox you do this by clicking Edit, then Find. This brings up a Find: window at the bottom of your browser.  You can skip this step if you want and just scroll about but I find that it saves time, especially if I was long winded that day or the item is in the comments section.

For example, I want to see the last time I put the WHX model in a post.

  • I put WHX model in the search window at upper left.
  • It returns link entries for April 22, April 21, and so on in reverse chronological order.  
  • I click the first one.
  • Then I put WHX in the Find: box at the bottom of the browser and it takes me to the ticker as many times as I click next until I find what I'm looking for.

I'm told this is awkward, but since I write on average just over 1,200 words per day in the posts and more than that in comments and the archives go back to 2006 I have to say that it works better than a pile of spiral notebooks and vertical filing systems (read tall stacks of papers that make the floor an obstacle course) that litter RMDs office. The alternative is to ask me, which is fine, but may take awhile.

 

 

 

248 Responses to “T.G.I.F.”

  1. 1
    zman Says:

    KOG traded $3 this morning, looks like the trade errors continue.

    MCF on the tape with earnings, didn’t know they were reporting today, will have something out shortly.

  2. 2
    choices Says:

    DJ news wire has note that a worker on the RIG/BP platform in the Gulf says human error caused the explosion.

    http://custom.marketwatch.com/custom/tdameritrade-com/html-story.asp?guid={b0b18055-d590-438a-b1b8-6185c3ca209e}

  3. 3
    kaman Says:

    I believe Cramer also said he felt we still needed to “genuinely” test those lower levels we reached yesterday…we’ll probably get a good start on that this morning.

  4. 4
    zman Says:

    re 2. That doesn’t sound plausible. Wyoming, TEXW, Reef, chime in.

  5. 5
    zman Says:

    MCF Quick Look

    Production was partially shut in as previously announced for the quarter at 59.2 MMcfepd, should be close to 80 now.

    Revenue of $37.8 mm vs one analyst at $46 mm and EPS of 11 cents vs $1.16 exp (the Street just doesn’t follow this name and MCF just doesn’t care about that)

    Eloise South prospect not yet logged, expect to log by end of Month so nothing to add on the ops front.

    Don’t see that they are having a CC.

    Production now at

  6. 6
    bill Says:

    mcf wrote off 2 dry holes in the qtr and wrote off some lease’s and still reported a profit which is amazing

  7. 7
    zman Says:

    Bill – I agree. Can’t blame the guy for not doing a conference call either as he did one for the dry holes and that was pretty standup of him. Their operating costs remain offshore industry best (aside from the pipeline snafu which is not unique to them or their fault). Here’s to hoping someone decides its not worth holding and I have an oppy to pick up some discounted shares.

  8. 8
    BirdsofpreyRcool Says:

    Frankly, not looking good this morning, credit market-wise. Why should we care? I’ll post Cross-Asset Class Strategist #1s comments after this note and tell you why. I wouldn’t short this market on a Friday, faced with merger Monday… but, I think we go lower before we go higher. It’s probably more b/c of what is happening to “bank reform” and the continued Washington Power Grab, that just Greece and PIIGS running wild… that’s how the credit market is trading, that is what I believe.

    So, here’s why today is going to be a tough slog…

    IG +1 1/4 bps WIDER to +130bps. This is not good. The index tried to rally this morning, opening up around -8bps tighter. But people weren’t going for it and index drifted wider (down, bad). After yesterday’s +23bps close, building on this is not a recipe for sustained higher equities.

    HY is now almost a full point lower to 94. Again, building on yesterday’s huge drop.

    TED worries me, as TED is worried… He is showing +31.4 bps this morning. Well above the 25 bps normal range.

    Will continue to report/monitor during the day.

  9. 9
    Wyoming Says:

    I got this report this morning. Now taking applications:

    http://screencast.com/t/Yzk1NThmY

  10. 10
    bill Says:

    i wonder what sd is worth without arena in this pricing enviroment

    they have negative cash flow

    no equity and 2.6 b in debt ev about 4 b

    they have no ng hedges after 2010 and cant make money with 80% hedged at 8 in 2010.

    int exp is about $ 2 per mcf

    ard’s capital budget had them spending 100 % of their cash flow roughly 200 m.

    If sd, continues that approach, there will be no incremental cash flow

    With sd having a 6 handle, i dont know how ard shareholders vote yes

  11. 11
    Wyoming Says:

    Picture becoming clearer on BP Deepwater Horizon incident

    * Analysis by: Michael Lynch

    Summary

    BP said on Sunday that the GSF Development Driller II will drill a second relief well on the Mississippi Canyon 252 block. GSF Development Driller III spudded the first relief well on May 2. Discoverer Enterprise, also on location will work on containment. Oil flows from the end of the riser, the end of the drill pipe and a crack in the riser. BP sheared off the drill pipe and will install a valve in the next one or two days. This will stop one of the three leaks.
    Analysis

    The BP report confirmed that they had tools in the hole at the time of the blowout and explosion. This means that they were in the hole “open ended” preparing to set the final cement plug in the newly-installed production casing. The accident occurred 20 hours after bumping the plug on the casing and that indicates that the cement had not yet achieved its final set. One possibility is that they had already started to remove drilling fluid from the riser for transport back to the shore as required by Minerals Management Services. This could have induced a pressure drop at the bottom of the hole. Casing design calculations become tedious when an extremely high pressure is known to exist in the reservoir as was true in this situation. Another factor is the high temperature which could affect the setting time of the cement. When cementing wells at this depth where temperature is a concern, the cementers often add retardants to the cement to offset the temperature effect. These factors could be responsible for what appears to be a casing failure. From that depth, gas would rise to the surface in about 20 seconds. The explosion could have damaged the controls and umbilicals that activate the subsea BOP stack. This is as far as we can take the analysis until more information is released. The report is from a Rigzone Newsletter of May 3.

  12. 12
    BirdsofpreyRcool Says:

    Sent out by X-Asset Strategist #1 this morning —

    Credit Dictating Equity Direction..Dismiss the “Fat Finger” Joke

    Summary
    • Credit drove equity markets lower…not fat fingers….we’ll show you how it played out….
    • Credit Markets indicate that SPX should have closed an additional 13pts down…but NFP is a huge wildcard that scared investors deciding on taking a short position overnight
    • Given the severity and characteristics of the sell-off, we would recommend that investors be cautious in adding to positions on this back-ups… It is true that we are approaching the lower level of our expected 2010 trading range….but we would feel more confident adding to positions once the recent bank CDS rout is contained

    So Here we go….
    The committed bears now are convinced that the sovereign contagion and credit and equity price movements guarantee that we are heading for another credit crisis. A continuous stream of reports seem to be mimicking what we stated would be the cited “reasons” for a dramatic sell-off over a week ago. (Have you noticed the number of bank nationalization proponents in this group.) Committed bulls (as well as government regulators and senators who are convinced they know more than everyone else) seem convinced that exchange fat finger pricing caused global equity indices to free fall or that the current economic recovery will allow the EU time and resources to whether the current storm.
    The one explanation that we have not seen expressed …and which we believe is the reason the equity markets were down over 50pts in one day was, “It was just really good credit-equity arbitrage trading.” Maybe even as simple as a spike in fear based on a vicious sell-off in corporate credit…i.e. the CDX IG14 Index. LET’S EXPLAIN… The Timeline… We have a proprietary algorithm that we use to track the relationship between the S&P 500 Index and the CDX IG and HY Indices. Although the model requires consistent refitting to maintain an R-squared of greater than 80%, it does often provide excellent insight into when executable variances are occurring between the equity and credit markets. Whenever we state that Credit Outperformed or Underperformed Credit in our reports we are often referring to the results of running this algorithm.
    9:00 AM Our Credit-Equity algorithm caused us to contact a interested group of clients with a warning that credit was indicating that the equity markets were going to be down significantly more that the 3-4pts the S&P500 June Futures were stating.
    11:00AM The acceleration of the sell-off in the CDX IG14 Index caused our model to indicate that the markets were diverging. As such, we went out to some of our interested clients and told them that our model was indicating that the SPX would trade off at least 30pts… The SPX was down less than 12pts at the time…and subsequently rallied to within 5-6pts of its open as we were having these conversations…..
    1:15PM The SPX was off by ~12pts, but the credit market sell-off is accelerating and indicating a 40+ sell-off in the SPX Index. Telling investors that the CDS market was pointing to an additional 28pt drop seemed to get more clients involved….as well as a healthy dose of skepticism 2:15PM We sent out a quick blast…”Get out of the way NOW…Credit is in Freefall”… The continued sell-off in the credit markets reached hysterical portions, indicating that the SPX sell-off could dramatically exceed 50pts….We noticed some fence sitting clients jump….
    Our Opinion….
    In our opinion, the equity market’s realization that the credit markets were going through some unprecedented turmoil sparked a huge sell-off in the SPX as investors tried to exit, short, buy puts, everything and anything to get out of the credit market’s way. This might have caused market makers to back away from the market…causing both credit and equity markets to feed a negative feedback loop…but the majority of the sell-off was not a COMPUTER GLITCH…credit was pointing to a flush The credit market sell-off increased to a +35bps just as the equity markets took its reported “fat finger plung.” However, our model indicated that equities should have traded off about that much before the fat finger mistake….
    The CDX IG14 Index ended the day 25bps wider… and the SPX ended -37.75pts. This would indicate that the equity markets outperformed the credit markets by at least 13-15pts.
    We have never tested out model overnight due to the plethora of events that are impossible to model. That is why we hesitate to suggest that the equity markets will open 13bps wider…however, that will likely be the bias….

    Summary

    Time to Go Bearish?
    We continue to believe that the SPX will end the year wrapped around 1250 and that we will trade in the 1100 – 1250 range for most of the year. Given the spike in the VIX the 1100 base number seems as if it is breach able…but we do not believe the SPX will breach 1100 for long… We do not believe Greece’s problems or sovereign spread widening will materially reduce US economic growth nearly as much as the Financial Regulatory reform package might.
    In our opinion, a major sell-off in the US equity markets has a significantly larger effect on US consumer sentiment and spending than EURO zone troubles. However, if EURO zone problems cause bank credit risk managers to continue tightening their lending standards rather than loosening them, the conversion from a recovery driven by federal government spending and one driven by consumers and private credit will falter. Ben Bernanke’s statements indicating that banks are beginning to loosen consumer credit terms must not be allowed to be a casualty of the Greece Crisis.
    Additionally, investor concerns that central banks will be forced to deleverage their balance sheets in a puking motion is miniscule. This was one of the reasons we said bears would circulate…but the risk is exceptionally small, in our opinion.
    After the market weathers a potential dead cat bounce, we believe that the risk/return traders see benefits shorting the recovery than being caught short on a second recovery rally. This could cause both equity and corporate trading to be choppy all day on Friday.
    We also believe that having a small short potion going into the weekend is a good idea…we expect investors will try and short the market if the EU does not show a willingness to provide support to all EU members.

  13. 13
    zman Says:

    BOP – Thanks, what’s HT saying?

    Wyoming – did you see 2?

  14. 14
    zman Says:

    Thanks for 11. So maybe the cement wasn’t set and they rushed it. Doesn’t sound like a problem with the BOP.

  15. 15
    BirdsofpreyRcool Says:

    z — HeadTrader is out of the office this morning… a scheduled vacation. Will miss him today.

  16. 16
    zman Says:

    Thanks BOP. Super fast market again this morning. Yield names rallying pretty hard.

    BOP or anyone, see anything from the sellside on KOG this am?

    Pati – will that explanation of how to search the site do?

  17. 17
    BirdsofpreyRcool Says:

    IG +5bps now

    TED ticking wider on US Treasury rally

  18. 18
    BirdsofpreyRcool Says:

    IG +3bps

  19. 19
    zman Says:

    Sort of thinking we bounce in the next couple of days, everyone suddenly too negative since Monday. We have a light load on ecodata early next week but a pretty important end of week. Note also that there a still two weeks left in the May contract for expiry.

  20. 20
    BirdsofpreyRcool Says:

    KOG — Pritchard put out a blurb. I didn’t see the whole thing, but the body language in the summary was positive.

    Also looks like KeyBanc and Thomas Weisel probably went out with comments too. As both firms have “buys”, I would assume the comments were positive. But, only an assumption.

  21. 21
    VTZ Says:

    Weekly close above 1202 for gold seals the fate for a retest of the alltim and would be another alltime weekly closing high (last week was as well).

  22. 22
    zman Says:

    Large cap E&P greening the way for the rest of the group. EOG getting the biggest dead cat bounce at the moment.

    Thinking to do a trade in XEC but want the market to settle in for slower Friday trading and the conf call is not until this afternoon.

  23. 23
    Wyoming Says:

    The layman terms. Think back to some of the pictures and cements I made about plugs, bop’s, human error.

    They had pipe in the hole to lay the top plug, remember I said I wondered that HAL said they had not laid the final cement plug and whether they did the initial (lower plug)?

    The retarder comment is right and wrong, remember, we have hydrates issues and it is cool. You could be at a temp where you might add a little retarder. (I showed a rough graph of the temperature gradient). You would not add too much retarder. Once again, if they mix it wrong (add too much – like that has not happened before) the cement will stay as a liquid longer, not solid.

    Say it required 0.01 gallons/sack of retarder for the cement and they accidentally added 0.1 gal/sk. Big difference, especially if it is really concentrated. Offshore, we like to use liquid additives in concentrate, less volume in storage on the rig and boat, easier handling, easier operation. Bags don’t work too well when they get wet on the boat ride out.

    They then go and do a negative test on the plug / seal by pumping water down the kill line to test.

    Got to go but there could be some negative testing involved, somebody jumped the gun and circulated the riser out. Remember I said that they did not hold too much pressure.

  24. 24
    BirdsofpreyRcool Says:

    The risk recently has been to be short, over the weekend. So, with that in mind, perhaps we close around neutral today. I will take my clues from what credit is doing. But, I am not shorting/selling, as I believe we are still underpinned by an improving economy.

  25. 25
    choices Says:

    Thanks much, BOP, for the continued comments on credit situation-this credit situation really bothers me-I believe this is the canary as you have said many times-TED is moving up.

  26. 26
    Wyoming Says:

    cements = comments (fat fingers)

    14=11

  27. 27
    zman Says:

    re 23. Thank much for the explanation and your patience. If ever you want a hat just ask although we can’t ship overseas.

  28. 28
    zman Says:

    re 26. Fat fingers a big problem of late.

  29. 29
    cargocult Says:

    JB-I love that filled gap on the EXXI chart, and voted by the way.

  30. 30
    zman Says:

    Oil not buying the rally in the S&P. Another canary of late.

  31. 31
    Wyoming Says:

    Got to go had another fat finger moment. This will be an oilfield mystery, they can not take a peek inside because it will just get worse.

    You can always send it to my house, I still like in Fort Worth.

  32. 32
    bondbuddha Says:

    1 month Libor is finally on the move as well which is very important in my market, as I see from my HT this am from the desert in Arizona, damn I leave for one day and look what happens.

  33. 33
    BossmanG Says:

    BOP, Re:12 can you provide a link to the pdf? Very interesting…

  34. 34
    zman Says:

    Not hearing anything on the SD call to account for the continued weakness but the downgrade to guidance may be enough to send people on to the next ticker on days like today.

    Watching XEC come off.

  35. 35
    zman Says:

    CAM up, rest of that group down, wondering if the human error element gives the name a little vindication here.

  36. 36
    zman Says:

    SD – the industry as a whole is subeconomic at current gas prices. Rigs roll lower either this year or next.

  37. 37
    zman Says:

    Zerohedge pointing out that euroyen was blowing out well before the S&P making the fat finger argument pretty unlikely. This is a hair trigger market, yesterday could easily repeat, sitting on hands.

    I came on the SD call a little late, didn’t hear much on ARD deal, will listen to first part later, no one cares anyway today.

  38. 38
    Garyinhou Says:

    thoughts on WLL??

  39. 39
    BirdsofpreyRcool Says:

    BossMan — #33… Strategist’s firm is having email problems this morning. He had to send it out via note on bloomberg… so, no link, like we usually get.

    TED 31.75… coming in just a smidge

    IG +1 (so better than open)

    but HY -1 1/16… still not flashing the “all clear” sign.

    That said, I would NOT be short over the weekend.

  40. 40
    zman Says:

    Gary – its getting sold off as oil falls, not a rational move but I’m not ready to step in front of this market for more yet.

  41. 41
    BirdsofpreyRcool Says:

    IG +3… so, following high yield index (and stock mrkt) lower now.

  42. 42
    zman Says:

    Starting to see some data delays and out of sequence trades as the market moves lower.

  43. 43
    BirdsofpreyRcool Says:

    KOG now down on what I thought was a decent quarter… will depend on what they say about the small funding gap, I think. But also, just see a continuation of selling risk, that started yesterday… well before the PG Trade that was Heard ‘Round the World.

  44. 44
    BirdsofpreyRcool Says:

    IG +5… ugh. Here we go again.

  45. 45
    zman Says:

    BOP – yeah, need a selling crescendo again with a higher low than yesterday to give the market any hope of an actual rally. Stocks not trading on individual merits.

    Yield names mostly still up on the day but seeming some of them start to get hit as well. Napalm in the morning kind of feel to it. I have no inclination to short the group here, but glad to be over 50% cash now.

  46. 46
    bill Says:

    wll down 5 _+

    im afraid to look at other names

  47. 47
    bill Says:

    despite the market sd looks like a wounded duck, im baffled why ard would vote yes after sd has fallen 20 % and with no collars

  48. 48
    jiveyjr Says:

    only thing I got that doesn’t look wounded is QID…put it on Mon. but not nearly as much as I should have…but it didn’t look so good Mon. evening

  49. 49
    BirdsofpreyRcool Says:

    IG +6bps

    HY -1 13/16

    The ugliness continues.

  50. 50
    BirdsofpreyRcool Says:

    X-Asset Class Strategist (XAC Strategist for short, in the future) says the dead cat bounce he called for played out and now saying that his credit model is pointing to down 30 on SPX today.

  51. 51
    zman Says:

    Looks like they want to retest yesterday’s lows.

  52. 52
    BirdsofpreyRcool Says:

    Oh… got there as i was typign up his comments.

  53. 53
    Nicky Says:

    Morning all. Talk about an unnerved market! That said technically I agree with the earlier comment – that we need to retest the lows. I personally do not thing we need to see 1065 although of course never say never but we probably could 1085/90 is enough.

  54. 54
    BirdsofpreyRcool Says:

    IG +13 1/2

  55. 55
    VTZ Says:

    At this point I’m actually hoping for a big collapse, as sick as that sounds.

  56. 56
    zman Says:

    Oil just under $75 in a fast market, obviates the need for any OPEC action at the next meeting in September. I think they continue to overproduce relative to quotas but have heard some sounds that an increase in the current level of cheating would be frowned upon should oil break the low end of the $70 to $80.

  57. 57
    zman Says:

    V – If your not selling immediately or have shares and cash it makes a lot of sense to shake it out as quickly as possible.

  58. 58
    BirdsofpreyRcool Says:

    Touched the lows (wides) and coming back now. Watch credit… the rest of the market is.

    IG +8 1/2

  59. 59
    BirdsofpreyRcool Says:

    XAC Strategist’s model is now saying SPX should be down 35 pts, based on mrkt’s correlation to credit indices.

  60. 60
    BirdsofpreyRcool Says:

    IG +10 bps

    TED 32

  61. 61
    zman Says:

    XEC down $5 on those earnings. I’ll bite.

  62. 62
    BirdsofpreyRcool Says:

    IG +6

  63. 63
    ilikericky Says:

    RE 62 BOP please can you explain what IG +6 means thanks

  64. 64
    zman Says:

    ZTRADE – ZIM – XEC

    Added (10) May $65 Calls for $1.20, on the mid of a very wide spread, with the stock down $4.80 at 60.20 on the day after earnings and in a very weak, oddly behaving tape. See site for comments on earnings today, conference call at 1 pm EST.

  65. 65
    zman Says:

    KOG call in 15 minutes.

  66. 66
    Nicky Says:

    VTZ – I was reading stuff about the 1987 crash last night. The general consensus was that the second move down was the buy of the century.

  67. 67
    pwdrhound Says:

    Adding to # 63: You’ve been mentioning TED lately. I’ve looked and can’t figure out what that refers to. Thanks.

  68. 68
    zman Says:

    Nicky – thanks for #53.

  69. 69
    Nicky Says:

    We could be looking at yesterday being the end of wave iii down and we are now in an abc for wave iv. This is the b down, before the c up.

  70. 70
    zman Says:

    Looks like S&P bounced off it’s 200 day around 1095 or so, not that that means much as it sliced it yesterday on the weird trading. I’d like to see it hold the 2010 low of 1,044.

  71. 71
    BirdsofpreyRcool Says:

    IG = shorthand for “Investment Grade” CDS index. Basically a proxy for “risk” in the corporate bond market. + = wider = worse, as corportate bonds are traded on spread to treasuries. +6, for example, means that the index has moved wider by 6 basis points to treasuies… higher yield means lower price means bad.

    HY = “High Yield”… same thing, but for junk bond mrkt. This mrkt is traded in points, like stocks. So, down 1 point is like a stock dropping a point (dollar, %age, etc).

    Since the bond markets are several times the size of the US stock market, it is the “body of the dog” to the stock market’s “tail of the dog.” The “head of the dog” is, of course, the US Treasury market.

  72. 72
    Nicky Says:

    As Europe is unnerving this market any chance it stabilises when Europe closes in 40 minutes time?

  73. 73
    ilikericky Says:

    RE 71 Thanks so much you are a star.

  74. 74
    BirdsofpreyRcool Says:

    TED is shorthand for “TED Spread.” Google that… there should be a lot of info on that measurement.

    But, it is the most sensitive global FEAR index out there. Lower = better (anything below 25 bps). Higher = not good stuff happening in the world which will affect corporate borrowing rates on a global basis.

  75. 75
    cargocult Says:

    Any thoughts on ATPG as a hold?

  76. 76
    Gmlgdc Says:

    The BP discovery is a 2000 acre closure, so a lot of oil down there

  77. 77
    BirdsofpreyRcool Says:

    IG +4 1/2

    TED 31.7

  78. 78
    pwdrhound Says:

    got it. thanks. Was just googling TED by itself before and didn’t get anywhere.

  79. 79
    BirdsofpreyRcool Says:

    KOG conf call starting in a few…

  80. 80
    BirdsofpreyRcool Says:

    no worries, pwdrhound… too many “Ted”s spoil the search.

  81. 81
    Nicky Says:

    SPX bounced off its 200 day moving average at 1095.69

  82. 82
    skimo Says:

    I’m not a GS fan, but you have to give Blankfein credit for having a quick sense of humor:
    Goldman Sachs (GS) shareholder meeting this morning at the firm’s headquarters at 200 West Street.

    When gadfly Evelyn Davis confronted CEO Lloyd Blankfein on whether he’ll step down, saying “You aren’t as smart as you look,” Blankfein responded with a smile, “That’s the nicest thing you ever said about me,” to much laughter.

  83. 83
    BirdsofpreyRcool Says:

    KOG starting….

  84. 84
    BirdsofpreyRcool Says:

    can anyone help post comments from the call?? thank you!

  85. 85
    BossmanG Says:

    BOP, who is the source of that piece? X-Asset Strategist #1? Reading the pieces that you have put up on the board are very interesting…can you provide some background on why you follow them or their backgrounds?
    I believe you follow 2 individuals?

  86. 86
    zman Says:

    BOP – KOG. I’m on it, waiting on them to saying something not generic.

    5 Bakken wells to be completed and 1 Red River well, should see volumes from these late 2Q

  87. 87
    BirdsofpreyRcool Says:

    Bossman — will do… listening to KOG now, but will get back to you.

  88. 88
    BirdsofpreyRcool Says:

    oooooooooo… the WEATHER excuse. You hate that one, z.

  89. 89
    zman Says:

    KOG Notes:

    BOP – not so much in the Bakken with regard to cold weather.

    Revolver banks narrowed down, hope to have it soon. Yeah, me too.

  90. 90
    BirdsofpreyRcool Says:

    “all our capital structure growth needs”… take THAT, KeyBanc!

  91. 91
    zman Says:

    KOG Notes Operations Update:

    Moccasin Creek Wells – 17,599 BOE and 12,270 BOE in the second 30 days (not in the pr, those are respectable decline rates)

    Raising thoughts on EURs.

    They had thought EURS were 350 to 450,000 boe for a short lateral. Now thinking it’s above 450,000 boe.

  92. 92
    BirdsofpreyRcool Says:

    given the delays in completing, wonder if they can contract out their 2nd rig for a while, to pick up some income, while waiting on a frac crew for capped wells…

  93. 93
    zman Says:

    OII actually green, CAM thinking about it.

    USEG green while BEXP continues to suffer which makes little sense.

    KOG Notes:
    Three Forks well is drilling.

  94. 94
    choices Says:

    options mkt does not seem very liquid, spreads are huge in some cases

  95. 95
    BirdsofpreyRcool Says:

    TPH out banging the table on BEXP this morning.

  96. 96
    zman Says:

    BOP – it’s over in the Red River area, service should not be delayed over there, there ya go, he’s talking about it now. Then south to Elm Coulee (also not that big a hot spot as it historically has been).

    EOG, ECA, SWN green, S&P down 1 point. Nobody complains when they take the market up willy-nilly.

  97. 97
    zman Says:

    KOG Notes:

    How to pay for the $60 mm bugdet:
    Cash flow, cash on the balance sheet, and revolver to pay capex. See my comments in the post for a likely breakout of that.

  98. 98
    BirdsofpreyRcool Says:

    IG rallying now! -4 bps

  99. 99
    BirdsofpreyRcool Says:

    #97 … did he say that? Have to monitor several things at once here, missed that.

  100. 100
    zman Says:

    Yes, no mention of equity offering as an option. Didn’t say he wouldn’t either but that’s the list he gave.

  101. 101
    BirdsofpreyRcool Says:

    thanks. that was the KEY statement I was trying to listen for. appreciate the assist.

  102. 102
    BirdsofpreyRcool Says:

    “We hate your parent bank, Mitch” 😉

  103. 103
    zman Says:

    KOG Q&A

    All proppants are getting difficult to get, they’ve gone to carboprop (CRR).

  104. 104
    zman Says:

    KOG Q&A

    Re a Montana Bakken question, they gave the analyst the stiff arm, no comment at this time, tells me they are on it.

  105. 105
    zman Says:

    Blink and there is a five point swing on the S&P. Sheesh.

  106. 106
    choices Says:

    Z,BOP-do you believe the hi-yield MLP’s, etc got hammered because of the weakening credit markets-question is which port in the storm-I “planned” to be heavy in cash in May with hi-yields primarily-my hi-yields got hammered even before the insanity of yesterday, and yesterday a complete collapse, and I’m certainly not in cash-something about plan the trade, trade the plan fell down for me?!

  107. 107
    zman Says:

    KOG Q&A

    Good question re the weather. KOG had said 1,500 boepd in early March, he said if all wells were on prod they would be at 1,200 boepd, kind of a cagey answer. He needs to be blunt where they are at and what weather (now it’s rain) is doing to them. You want people to lose interest? Be cagey. You want them to lose more interest? Tell them your production and then basically admit that was the peak for the near term.

  108. 108
    skimo Says:

    KOG Aren’t they really just doing a good job of explaining the operational issues of multi-well platforms versus saying they’re going away from them.

  109. 109
    BirdsofpreyRcool Says:

    choices — I don’t know what you are investing in, for HY, but i like buying individual high yield bonds, not bond funds. Bond funds are too sensitive to hot and scared money flows and tend to lock in losses and let gains evaporate as they add/subtract investors. If I buy a bond at a good yield and price, I can hold thru price vol and clip coupons.

    I don’t know why the MLPs got hammered. I used to follow that mrkt, just haven’t recently. In the past few yrs, MLPs have been used as “cash proxies” for hedge funds. So, don’t know if funds have been pulling cash from that mrkt… but I will sniff around a bit.

    MLPs can also be thought of as very-sensitive proxies for the IG bond mrkt. Those spreads have been HAMMERED over the last week or so. That would explain the thwacking the MLPs got, as much as anything, I would think.

  110. 110
    BirdsofpreyRcool Says:

    KOG — i think they are being much cagey-er than usual. Makes me think there is some back-office stuff going on. They are just a little too defensive about giving straight answers…

  111. 111
    bondbuddha Says:

    I would like to echo BOP’s comments and even go further and say please never buy a bond fund, please buy individual bonds. You as an investor will far far better served.

  112. 112
    RMD Says:

    BOP please keep us updated on XAC Strategist’s thoughts if you get a chance; (curious if model keeps working).

  113. 113
    choices Says:

    Thanks BOP, bondbudda-have stayed away from bond funds, but notice bonds themselves are getting a tad weaker (obvious comment, I know).

  114. 114
    BirdsofpreyRcool Says:

    bondbuddha — thank you for that more forcefull answer. I worked on a very large mutual fund family bond fund for years… I would not put my own money in the fund. It wasn’t that the PM was bad… but the technicals of the money flows in the bond mrkt (especially the HY mrkt) just work against the investor in the fund. PM’s have to sell, when they should be buying… and can’t sell, when they should be selling.

  115. 115
    BirdsofpreyRcool Says:

    RMD — will do. Today is the first day I heard that he was running that model. Basically, he’s just regressing the stock mrkt on the credit market… but having to tweak. So, don’t know if it’s useful for long-term prediction… but probably worth noting on a 2-3 day lag basis.

  116. 116
    zman Says:

    KOG Q&A

    Exit rate: how are you OK for a 3,000 boepd exit you previously suggested … said we don’t give guidance, said everyone can extrapolate well additions to come up a number … that would be a NO.

    I’m not unhappy with how the stock is acting, just with how management is acting. I’ve noticed that Lynn is more “on” some times than others. Sounds a bit like logistical growing pains.

    Said the revolver will be done “soon”. We always knew they had a gap there until they really kick up the cash flow. He said the borrowing base exceeded their expectations which is very welcome news.

  117. 117
    RMD Says:

    MLPs: my suspicion is that there was a macro trade involving many of them going ex. dividend on Wed. which spiraled into Thurs. Trading desks remain silent on this.

  118. 118
    zman Says:

    KOG Notes:

    He is saying that they are shaving time on the actually drilling, says costs are down from $350 to $500K, also welcome news. Would like that to translate into shorter times between news of completed wells.

    BOP, did he say 5 Bakken wells waiting to be completed plus 1 Red River?

  119. 119
    BirdsofpreyRcool Says:

    choices — yes, bond prices themselves are down with this mrkt, of course. But, you don’t have to lock in those losses and you get paid to wait (the coupon-clipping part). That said, I would never buy a bond with a less than 6-month holding period… and I usually plan to hold to maturity. Anything short of just plain old cash (which pays nothing, but loses nothing) is taking timing risk in the mrkt. And this is one squirrely mrkt!

  120. 120
    zman Says:

    “Ya know” count for Lynn: 238

  121. 121
    BirdsofpreyRcool Says:

    #118 — i’m gonna have to go back and read the transcript… been too distracted by credit this a.m.

  122. 122
    Patipati Says:

    Zman, search works!

  123. 123
    BirdsofpreyRcool Says:

    I think someone kicked Lynn in the shin recently… wonder if it was a bank or a partner or the Tribe. But, something is outta whack here. Nothing major, just kicked him outta balance.

  124. 124
    BirdsofpreyRcool Says:

    IG -5 bps

    checking with XACS#1 on what this means in his predictive model….

  125. 125
    RMD Says:

    FBIR data point: ERF mentioned 3 wells IPed at 1,100/d with 4,000-4,300 ft laterals and 12 stage fracs. Will have 3-6 more wells by June. Bought 100,000 acres in southeastern Saskatchewan ($1,170/ac.). Had 3 wells there, no results announced, but adding 2 rigs.
    Don’t know ERF but sounds interesting; yields 9.2%, pays out about half of their cash flow.

  126. 126
    BirdsofpreyRcool Says:

    wow… IG range today has been from +115 to +140bps. a 25 bps swing in IG is like a 700 pt swing on the Dow… pretty wrung out… and it’s not even lunch yet.

  127. 127
    skimo Says:

    123 KOG CC sounds slightly similar to the EOG Q4 CC, only theses guys aren’t saying “Wait til 00/00/00 then we’ll give you detailed answers”, they’re just not answering. Could they be antsy about stock drop last few days? I’ve seen other mgt teams get a case of the “let me get back to you on that” when stock drops, regardless of reeason. They get convinced when their stock is going up that its all because of them, so when it goes down, their confidence level goes down.

  128. 128
    RMD Says:

    124; bought some SDS in case XAC is correct.

  129. 129
    zman Says:

    Hear ya BOP, don’t think it’s a big deal, just growing pains. He was firm when it came to the borrowing base being better than what they were thinking. Sounds like a pr there in the next several weeks. He was off his game on the operations stuff today and if I want to hear someone say “Ya Know” that many times I’d watch the post game NBA interviews.

  130. 130
    BirdsofpreyRcool Says:

    skimo — great point. thank you.

  131. 131
    zman Says:

    RMD – ERF does sound interesting. I think that’s EOG’s Waskada South play.

  132. 132
    RMD Says:

    Maybe KOG being antsy is they did plan an equity offering…and now they don’t like the price nor the environment for one.

  133. 133
    RMD Says:

    TAT is my Hero of the Last Two Days.

  134. 134
    Gtinvest Says:

    Z unless I missed it what is your current opinion on NOG. The price is getting interesting again?

  135. 135
    zman Says:

    Ski – maybe they were hoping no one would ask a question about the 50,000 share option exercise and punt by the chairman on May 3. Nice timing at $4.13 with the quarter about to miss (slightly), think he had those vested for the last 4 and 1/2 years and had 6 months left until they expired. Not to worry though, he still has 1.5 mm shares.

  136. 136
    BirdsofpreyRcool Says:

    hmmmm …. HY index only down 1/4 pt now.

    choices — your bonds should be doing better soon. Hang in there.

  137. 137
    BirdsofpreyRcool Says:

    RMD — some of the TAT-seller shares were crossed y’day. Still some left, I am told. But there are buyers for the remaining shares. So, unless there is bad fundy info, don’t think it dips much below $3.70 here (where the shares crossed).

  138. 138
    PackMan Says:

    BOP #12 … that was a good piece.

    What firm is that ?

  139. 139
    zman Says:

    GT – you didn’t miss it, I didn’t give it, got wrapped up in broad market thinking yesterday and didn’t have more than a quick look at the pr. From that I still like it but I’m not in it at all at the moment. I continue to think WLL is a steal hear and am considering how I want to play a late June / early July pop at BEXP over news. Probably a smaller rally late may with more regular wells and their first 36 stage lateral as well.

  140. 140
    BirdsofpreyRcool Says:

    RMD — SDS… XACS seems to approve… he just posted the following —

    Unlike yesterday, credit and equity markets are trading in lock step…so I think it is a struggle between investors that believe in the economic growth story and fear of a liquidity driven credit crisis…the second portion is a fear..the first is a fact…but it does make sense to be short the market going into the weekend…..EU can potentially do something that causes spreads to rally 10bps…they can also do something that could casue them to fall off 20

  141. 141
    choices Says:

    Thanks again, BOP-I NEED to get a lot smarter vis-a-vis the credit market.

  142. 142
    choices Says:

    Interesting comment from another site: How do I buy when the blood in the streets is mine-heh.

  143. 143
    zman Says:

    Green market. Welcome to the Bellagio sir, may we take your wallet?

  144. 144
    zman Says:

    re 142. By having cash ready on the sidelines at all times.

  145. 145
    zman Says:

    XEC call in 45 minutes.

  146. 146
    dij Says:

    Z, are you just holding back from buying anything, like WLL or EOG, say June options, until “things” are clearer, steadier? Even thoug it is a steal. I think it will take a good long time before there is much confidence in putting money out there.

  147. 147
    BirdsofpreyRcool Says:

    I read 3 XAC strategists… 2 i get daily, 1 only when someone forwards to me (used to get his stuff, until he moved to a house i don’t do biz with). The only strategist of worth in this mrkt is one who understand — at a gut level — both debt and equity markets. Most equity people tell you they understand debt. Most debt people tell you they understand equities. But there are very very VERY few “cross-asset class investors and/or strategists” who actually do. Most others are just faking it with buzz words.

    I have added “BedTime Mrkt Strategist” lately b/c he takes the extra step of incorporating politics and a more global-macro view in his commentary, as well as having a good XAC understanding.

    XACS #1 saying he agrees with the SDS purchase for the weekend, by the way. Not that monday is going to be a down day… but he sees more risk to the downside, with credit where it is right now, than to the upside. That said, he is not in the “short the mrkt” mode… just hedging his long positions. He thinks GS and BAC and friends have a very good year this year…. but hedging his long positions with ETFs.

  148. 148
    PackMan Says:

    BTW, what yesterday showed to me is how phony this rally has been; driven by liquidity and HFT algo’s,

    When push comes to shove, there is no legitimate support to equity prices.

    Yesterday was a little bit of smoke in the theater. What will happen when there is a real fire ?

  149. 149
    PackMan Says:

    SDS; a better hedge would be with options. Cheaper. And the high liquidity premiums will likely hold up.

    You can get hurt badly, quickly on an overnight gap by holding SDS; less hurt if you bought some options (calls).

  150. 150
    zman Says:

    dij – just waiting a bit before the market decides from what level we should go forward from. I added some things on Tuesday and Wednesday and Thursday and today, and not all of them small. Adding now, when they are ignoring good news and killing bad feels like more of a bet on the market than the names. I hear you on the longer dated options but honestly those still don’t offer much protection if the market slides hard again.

  151. 151
    PackMan Says:

    BOP you are so right about the diff btw credit and equity.

    I did not appreciate myself until I had a stint at a credit focused HF. Helped me to better understand credit and credit issues.

    And for the most part, the credit guys do not understand equities either.

  152. 152
    Gtinvest Says:

    Thanks, 139, My thought was mkt scared now but this too will pass and Baakens are the safest place to produce oil now. And Nog has one of the smallest floats in the group for a reawakening. By the way according to an earlier report the coffer dam should be above the bop now!http://www.fox8live.com/news/local/story/Giant-box-close-to-being-over-oil-spewing-well/OoLy36lyt0ObKgE5hOYxJA.cspx

  153. 153
    BirdsofpreyRcool Says:

    TED backing away from the FEAR trade a bit, as money comes out of 3-mo US Treasuries.

  154. 154
    dij Says:

    Thanks, that’s what I thought, but wanted to hear you say it!

  155. 155
    BirdsofpreyRcool Says:

    XACS#1 update

    -9 to -10 on IG is worth flat on SPX while 0 on IG is worth -15 on SPX…that relationship is very different today then it was yesterday..and the reason I backed off earlier today… it is trading in a set range…information pick up minuscule right now

  156. 156
    BirdsofpreyRcool Says:

    KOG shrugging off Lynn’s stammering “ya knows” and defensive body language. Guess people heard enough to conclude that there isn’t going to be an equity issuance announced on Monday.

  157. 157
    zman Says:

    re 156, agreed.

  158. 158
    BirdsofpreyRcool Says:

    Good commentary on bloomberg… at some point, the U.S. will be up to bat on these issues too. Pays to see what is going on in Britian, as the U.S. and British policy often plays policy/ideology tag.
    —————————————

    U.K. Vote Leaves Candidates With Heads in Sand: Matthew Lynn
    2010-05-07 10:16:26.385 GMT

    Commentary by Matthew Lynn
    May 7 (Bloomberg) — The stock markets are slumping. Athens is in flames. The vultures of the bond market are circling. And what does one of the most heavily indebted of the major industrial economies vote for? Stalemate, dither and indecision.
    The U.K. general election has left the country in a worse position than ever. Even without the final results, it’s clear that David Cameron’s Conservative Party has fallen short of the majority it needs to govern effectively.
    Whether Prime Minister Gordon Brown manages to hang on in a coalition with the Liberal Democrats, or whether Cameron forms a minority administration, doesn’t make much difference.
    This was a phony election, fought between leaders who could only squabble over who could dig their head deepest into the sand. It has produced a phony result. The real election, in which the U.K. faces up honestly to its problems, is still some way off. Not until the markets force reality on the British will any clear policies emerge.
    None of the main parties will be able to draw comfort from the results. Brown, in his first election since taking over from Tony Blair, was rejected. The Liberal Democrats, the centrist party whose leader Nick Clegg scored a triumph in the U.K.’s first televised debate between the party leaders, failed to capitalize on their early success in the polls. The Conservative Party, which earlier in the year was expected to win this election, didn’t get the breakthrough needed to govern alone.

    Real Loser

    But the real loser is the British economy.
    The election was fought against a backdrop of a growing financial crisis. The markets have been thrown into turmoil by the Greek debt crisis — not because Greece is a very significant part of the global economy, and not because its 300 billion euros ($382 billion) of government debt is enough to bring down the financial system even if the country does default. But because Greece is a symbol of a wider sovereign- debt crisis. Governments everywhere have borrowed too much, with little idea of how they will close their budget gaps.
    At more than 11 percent of gross domestic product, the British budget deficit is the largest in the Group of Seven nations. If any country should have been voting for a strong government, with a serious plan to get its finances under control, it was this one.
    But the government that emerges from this election isn’t going to be in any position to fix anything.

    One Party

    Some countries may be able to make coalitions work. Germany often gets them right. Italy usually cobbles together an administration, though that’s hardly an example to emulate right now. But the U.K. is used to one-party government. This isn’t the moment to be trying out a new way of running the country.
    A deal between the Labour Party and the Liberal Democrats would be an alliance between two losers. It would be propping up an unelected prime minister. And it could be secured only with a promise of electoral reform. The idea that the U.K., in the center of a global sovereign-debt storm, should spend a year arguing about different systems for electing their politicians is absurd. They might as well spend a year discussing whether Charles Dickens was a better writer than Shakespeare.
    The alternative — and the most likely outcome — is for Cameron to govern alone. There is no need for him to form a coalition with anyone: The Liberal Democrats didn’t do well enough to merit a share of the government; and his party won’t be in the mood to make concessions when it doesn’t have to.

    Currency Attack

    Cameron’s smartest move might well be to leave Brown and Clegg to form a government together. At some point in the next six months, the markets will almost certainly turn on the pound.
    With a run on the currency, the Labour-Liberal Democrat coalition would collapse, allowing the Conservatives to win an election soon afterwards.
    If Cameron does govern alone, he won’t be able to do anything. He ran on a timid manifesto that didn’t lay out the stark choices facing the U.K. It will need cuts to public spending as deep as anything Greece has been forced to implement. Wages will have to fall, livings standards will decline, and retirement ages will have to be stretched into the future. It has caused riots in Athens. There is no reason why it won’t in London or Manchester as well.
    Cameron’s minority administration won’t have the strength to make many difficult decisions. Nor will it have the mandate to stand up to the opposition those decisions would provoke.
    Stalemate won’t work for Britain. At some point, the country will have to tackle its addiction to debt. It has just postponed that day of reckoning at the cost of making it more painful when it finally arrives.

  159. 159
    zman Says:

    GS rallying, but XLF even on the day so the financials not getting as much of a bounce as I thought as per comments in the post.

  160. 160
    BossmanG Says:

    BOP, if you end up getting your hands on the pdf, do you mind posting it? just for future reference.

  161. 161
    zman Says:

    Thanks for 158, good stuff.

  162. 162
    zman Says:

    EOG trying to draw a line in the sand for a second time today, kind of an “enough is enough” move in the stock after the gap fill yesterday.

  163. 163
    zman Says:

    KOG green. I won’t hold those ZIM shares long.

  164. 164
    zman Says:

    XEC call in 15 minutes. Again, hats off to West on picking these guys some time back as the next big runner.

  165. 165
    West Says:

    XEC… Normally I would be beating the drum here to buy or increase position. I expect some good news out of CC and hope to hear updates on Granite Wash horizontals. They have a couple of newer plays that they might touch on if they have established their lease position. They just recompleted a well in southeastern OK that had been an Arbuckle and was plugged back an recompleted in three zones for over 800 bopd. Would be interesting to know their acreage position there. I am hoping for some EURs on their SouthTexas wells in Jefferson Co. Their 2 Sisters is still making the same amount that it IPed for 8 months ago, which is 40 mmcfged. The 1 well has already grossed over 500, 000 bo and 1 bcfg. Maybe they will get some much needed recognition.

  166. 166
    BirdsofpreyRcool Says:

    BossMan… will ask XACS#1 if he has a pdf link, just for U!

  167. 167
    zman Says:

    re Two Sisters. Unreal.

  168. 168
    zman Says:

    MCF would be in my “steal down here if I trusted this market” category.

  169. 169
    VTZ Says:

    Gold challenging yesterdays high. I think it’s a story people should be following to get a feel for the overall markets even if they aren’t directly involved.

  170. 170
    Gmlgdc Says:

    Re 165 the Jefferson Co. wells are starting to make water

  171. 171
    Nicky Says:

    Silver absolutely soaring. Not quite sure what this means! Gold moving up but relatively nothing like as much.

  172. 172
    BirdsofpreyRcool Says:

    EXXI 10s due 6/13 have fallen back with the rest of the HY mrkt (and the stock). Might be worth someone throwing a par (100) bid out and seeing if you can get smacked with it. 10% coupon… don’t think they stay out to maturity, tho. If/when DJ comes on, EXXI will refi their 16% notes (for shore) and probably these 10% notes too. So, might get paid 10% for about a year, then get called at 102.5 on 6/11… or 100 on 6/12.

  173. 173
    andy Says:

    re 170 – is that bad?

  174. 174
    Gmlgdc Says:

    From the water samples there is a lot of fines so they are probably pulling the wells to hard. Don’t know much about reservoir size but it can be the beginning of the end.

  175. 175
    zman Says:

    re 173. It’s not what you want to hear, depends on how much. Lots of wells make water their whole lives but the implication of that statement is that they are starting to water out. In the big picture of the company its obviously not impacting their ability to grow volumes given the guidance today.

  176. 176
    VTZ Says:

    Silver is just playing catchup and it looks like its going to break resistance too as gold breaks 1224 (assuming of course it does, for my sake).

  177. 177
    Gmlgdc Says:

    I used to own the Salt Water Disposal System they go to and the daily loads are increasing

  178. 178
    BirdsofpreyRcool Says:

    andy — oil floats on water… and nat gas floats on both. If your “straw” has sucked up all the oil (or are sucking too hard on the oil layer), you begin to draw up on the water underneath. Either way, it means your reservoir (or oily layer on top) is getting thin.

  179. 179
    VTZ Says:

    Keep in mind that last time gold was this high it was an “obvious bubble” now it is an “obvious reserve currency”.

  180. 180
    Nicky Says:

    vtz – silver often follows the broader market or vice versa. Do you feel the same way about silver as you do about gold?

  181. 181
    andy Says:

    gmi z bop – thks

  182. 182
    West Says:

    #170 good to know any other color?

  183. 183
    VTZ Says:

    Yeah I think that silver actually outperforms gold this year in terms of % gains once it can break out. It’s more of an industrial metal but there is also a tighter supply situation and it will act as a store of value. The paper markets are just easier to suppress than the gold markets because the size is much smaller. Once gold has an obvious breakout and silver can get cleanly above 20 I think it makes a strong run.

  184. 184
    ilikericky Says:

    RE 176 what are your thoughts on SLV the silver etf?

  185. 185
    Gmlgdc Says:

    Those wells are a basin floor fan deposit in the Yegua. XEC and Samson(big samson not little samson) reshot jeffferson Co. with new long line 3-D the sand deposit really show up two types of plays. One in the heart of the sands, other overbank tighter that you frac both are high percentage and work.

  186. 186
    VTZ Says:

    Crap… but I’m not going to rant about GLD and SLV anymore.

    Here’s an interesting stat… out of all the stockpiled gold in the world SLV (JP Morgan as custodian, unaudited) and CEF (central fund of Canada, audited) claim to have >95% of the world’s stockpiled physical silver. How can you trust SLV to deliver in any sort of crisis (which is what you are buying the fund for)?

    They are trading vehicles… not investment vehicles.

  187. 187
    VTZ Says:

    http://solari.com/archive/Precious_Metals_Puzzle_Palace/

  188. 188
    VTZ Says:

    Buy a real company instead… if you don’t want mining risk, buy SLW. They just purchase royalty silver streams off of existing mines (reputable ones).

  189. 189
    zman Says:

    XEC call started:

    We don’t have a budget. We make investment decisions based on our projects and wells. Not as scary a statement as it sounds given cash on the balance sheet and low, low debt load.

    Mid continent region:
    10 net wells awaiting completion
    47% of 1Q capital spent here
    Cana/Woodford shale (7 wells here awaiting completion), frac crew continuously working through backlog.
    Economics are greatly supported by liquids here (60% gas, 7 to 10% oil, 30%ish condensate)
    Walking through some nice oily wells out of the Cana.
    7 rigs continue to run here

    Permian:
    Horizontal oil plays working well, economic at $45 / bbl held flat.
    Permian oil up 12% sequentially.
    Bone Spring going better than pre drill.

    Avalon Shale play – drilled 1 well, completing and flowing back now, not a strong focus yet, drilling is moving their way, good acreage position in heart of play.

    Gulf Coast – Yegua virtually bulletproof to gas prices. Monster wells continue, sidetracking 1 well with mech issues, Nine Dragons #1, IP’d at 8 MM/d on restricted rate, continues success of Two Sisters. Expect to open it up as capacity becomes available, should go to the 40 MM/d wells seen here.
    Drilled 1 dry hole here.
    Sounds like another successful well, will know by next week.

    Andy – your word builder word of the day is “coning”

  190. 190
    ilikericky Says:

    Re 187 thanks for that.I have learnt so much today from you and BOP and everyone else here.Thanks.

  191. 191
    zman Says:

    Rig Count Watch

    Oil up 15 to 528 vs 190 a year ago.
    Nat Gas down 5 to 953 vs 730 a year ago.

  192. 192
    zman Says:

    XEC Notes:

    Things I like: Capex stays the same, but production guidance goes up 5% as per post. They underspent CF by $100 mm in 1Q and they could accelerate the budget if prices improve. Also talked about keeping dry powder for next year, so lots of flexibility here.

  193. 193
    zman Says:

    XEC call on hold due to glitch

  194. 194
    choices Says:

    web page of CEF: (includes about 42% silver, 56% gold) up 1.3% today

    Premium is high:13%

    http://www.centralfund.com/Nav%20Form.htm

    PHYS is more pure gold-Sprott managed, up 4.5% today.

  195. 195
    RMD Says:

    BOP 147 thought: it feels like the cyclical recovery has been thoroughly priced into stocks, so now we have to confront the “secular headwinds” Pimco talks about. This means down mkts to me.

  196. 196
    West Says:

    XEC note watch news on Avalon shale, hearing several companies have made good wells but will need to see decline curve. Note to XEC get a new CC service provider.

  197. 197
    ilikericky Says:

    Re 194 thanks so much for that as well.This really is a great board.Well done Zman.

  198. 198
    BirdsofpreyRcool Says:

    RMD — I agree with XACS#1’s call for the SPX to end the year “wrapped around 1250.” I just can’t call the ins and outs and ups and downs we have to travel to get there.

    I use the credit market as my guide, but then chose to downplay the signals in the TED Spread since March 16th. It was too tight then (which I pointed out, but didn’t do anything about), pricing in too much of a recovery. The stock market continued to rally for another month, as the TED continued to widen… then went thunk on Greece and BP and financial “reforms” and immigation headlines and continued bad employment.

    So many risks remain, one has to be vigilant of the ebbs and flow… but the tide will raise all boats. Company earnings are growing, for the most part. And in November, we should get a sense of which economic/governmental path we as a country want to take. Clarity will be helpful.

  199. 199
    BirdsofpreyRcool Says:

    intra-day comment from XACS#1 —

    credit and equity trading in line… euqity should probably be about 5 higher (SPX) at this point… but it’s not way off base, like it was yesterday [before the “glitch”]

    XACS put part of his morning write-up on a PDF for us… but only part… and with a large ad attached. But, this is the way he makes his living. And I always tell him, when I post his stuff… so it’s OK, z.

    http://www.capmarkets.com/ViewFile.asp?ID1=136518&ID2=414603937&ssid=1&directory=6571&bm=0&filename=5_7_2010_Credit_Dictating_Equity_Direction__Dismiss_the_Fat_Finger_Joke___.pdf

  200. 200
    zman Says:

    RMD – Pimco opened an equity fund late last year right?

  201. 201
    BossmanG Says:

    BOP, appreciate it, very intrigued (happens daily on this site lol).
    thanks very much.

  202. 202
    ilikericky Says:

    Re 194 would you know of something like PHYS but only Silver.I bought CEF.

  203. 203
    zman Says:

    XEC Q&A

    Good tone of call, analyst crowd sounding pleased. Sounds like 10+% growth 2011 is no problem at all, but will be gas price dependent.

  204. 204
    elduque Says:

    One thing that is loud and clear is there would be no drilling for gas without the necessity of holding the leases.

    I don’t know when, but sometime in the next 6 months the spread between oil and natural gas has to narrow, in my not so humble opinion. A good trade might be to short the USO and go long UNG.

  205. 205
    zman Says:

    Eld – it depends on the play. If you have granite wash or gulf coast wells that IP at 40 mm/d with a high liquids cut/rich gas then they are very economic sub $4. If you are dry gas in the Haynesville non-core, then yes, I’d agree with that.

  206. 206
    BirdsofpreyRcool Says:

    #204 … or just buy HK… which is getting thwacked with the Ugly Stick today.

    OUCH. That hurts!!

  207. 207
    zman Says:

    Emailed in ? on what I watch in yield plays

    VNR continuing to get hit, WHX reversing. I keep the following yielders on my main market watch

    Royalty Trusts:
    WHX, PBT, BPT, HGT

    MLP’s:
    VNR, EVEP, LINE, LGCY

    We hold the LINE and the WHX. WHX should announce their distribution next week, looking for $0.61 to $0.65.

  208. 208
    RMD Says:

    200 don’t know timing , but Pimco opened one or more.

  209. 209
    zman Says:

    Meanwhile, the beginning of what looks like a rollover in gas directed drilling has natural gas up 6 cents back to $4 now.

  210. 210
    elduque Says:

    I concur re HK.

    HYG coming off again.

  211. 211
    zman Says:

    XEC Notes:

    Avalon Shale – Eddie County, about 40,000 acres, but don’t know where the play is going to be, there is drilling all around them.

    West, anyone on your list aside from CXO in the play?

  212. 212
    1520sbroad Says:

    #209 – saw that horizontals were down one in the rig counts.

    It has been rare recently to have nat gas be one of a very few green symbols on my screen.

  213. 213
    tomdavis12 Says:

    Z: CSFB conducted a CC re the legal liabilities of the oil spill. 800-642-1687 #74365267. Conducted by a lawyer that will represent some plaintiffs. All legalize (boring). Informative if you want backround on any of the players.

  214. 214
    West Says:

    Most of the players are private companies with Fund money. I will try to work on it a little. Speaking of CXO anybody wanting wolfberry exposure this is the premier player in the western side of the play, Upton, Midland, and Ector Co. Their drilling super told me the other day that they are looking to add at least 3 more rigs in this area. I may have this wrong but I think on most of these Wolberry wells they are down to less than 10 days and on most 6 or 7 days . It is a manufacturing process and pretty unbievable to see from the air.

  215. 215
    zman Says:

    Thanks Tom – someone sent me a MS piece on a CC they had, pretty good stuff, sounds like BP and RIG on the hook legally, not HAL or CAM but its pretty tough to say as they still don’t what happened for absolute sure.

  216. 216
    zman Says:

    Thanks much as always West.

  217. 217
    BirdsofpreyRcool Says:

    Wounldn’t it be nice to wake up Monday morning and find out that BP’s containment box was working? Wonder what that would do for the Gulf Kids…

  218. 218
    choices Says:

    #202-do not know of pure silver bullion trust fund in US-maybe VTZ knows

    as V mentioned, SLW is a royalty play on silver, no direct mining expenses, SIL is a new ETF composed of large silver miners, SVR.UN.TO is bullion fund in Canada-I do not know anything about the latter two symbols but be careful on fees–Sprott is well known for his precious metal acumen but now the PHYS has a very large premium.

  219. 219
    zman Says:

    re 217. Mas verde, Bop, mas verde.

  220. 220
    RMD Says:

    West re 214: is there any indication the Wolfcamp or Spraberry continues south from Upton and Reagan counties into Crockett county?
    (The Mariner Energy (ME) map continues the western Wolfcamp down; the Pioneer (PXD) map stops the Wolfcamp and Spraberry at the southern border of Upton and Reagan counties.)

  221. 221
    andy Says:

    z – coning????
    talked to a forex trader today and he said yesterday caused by a citi trader who sold 16 billion e-minis instead of 16 million. back to the “fat finger” thory!!

  222. 222
    andy Says:

    theory

  223. 223
    zman Says:

    Housekeeping watch: if you reset your password sometimes the email goes to your spam filter.

  224. 224
    zman Says:

    http://www.glossary.oilfield.slb.com/DisplayImage.cfm?ID=497

  225. 225
    West Says:

    RMD, I think it is more a question of if it is economical viable that far south. There is an article from the Midland Reporter Telegram Oil Reporter that I will try to post on the Wolfberry play later.

  226. 226
    BirdsofpreyRcool Says:

    Consumer Credit came in a lot stronger than expected… XACS#1 thinks this is a quote “huge data point out of the fed” unquote. He thinks it indicates that an important leg of the recovery has gained traction, the extension and expansion of credit to the consumer. He goes on to say that it gives him a lot of confidence that our economy will continue to grow, as Greece related fears are settled.

    Germany has their elections this weekend. After that, there should be less political worries about the fallout over extending a German Hand for a Greek Bailout. The dirty little secret is that the ECB will actually make money, bailing out Greece in the long run. Like our Treasury did, using low borrowing rates on US $$ to buy assets/invest in US banks… except for Fannie, Freddie, GM, and Chrysler, the US taxpayer actually will have made a nice return on the “bank bailout.”

  227. 227
    BirdsofpreyRcool Says:

    To follow up, the ECB prints euros at a low rate to buy Greek debt at 18%… that is a trade that will make a nice return to the euro-lenders, albeit on the backs of the Greeks, who must live with the austerity measures they cornered themselves into.

    Lesson to the US… you do NOT want to build up debt to the point where you have to beg others to buy your debt at high interest rates. It is the last wealth-transfer a county has to give… and marks the end. We getting closer to that situation with every dollar we continue to borrow.

  228. 228
    VTZ Says:

    RE 218, 202: I might be mistaken now but previously but the PHYS premium is similar what it would actually cost you to get physical from a bullion counter.

    Sorry don’t know of any silver physical tickers.

    http://www.store.firstmajestic.com/ for actual physical. Painless checkout and order procedure, Good pricing.

  229. 229
    zman Says:

    Commitments of traders out, open interest in crude was up. Growth in longs slighted exceeded longs in the latest report. So the guy on CNBC yesterday saying the bulls had given up was full of bull.

  230. 230
    skimo Says:

    227 Won’t the US merely debase the currency, allowing the current members of society on welfare to continue on the dole(although at a much higher nominal rate) and turning us all into nice socialists with no wealth/savings.

  231. 231
    BirdsofpreyRcool Says:

    hmmm… had an open order for KOG from this morning at 3.52. Just filled. Sometimes you DO get what you asked for….

  232. 232
    BirdsofpreyRcool Says:

    skimo — no can do… we import too much sh*t from other countries. Can’t borrow at 18% and “grow” at 2%. (but i sense you were just kidding there…)

  233. 233
    zman Says:

    Maybe you put in the bottom on it BOP.

    Declaring beerthirty early.

  234. 234
    BirdsofpreyRcool Says:

    Note to self… do not forget the “rise cycle.” That is the only way you can “repeat.”

  235. 235
    skimo Says:

    🙂 half kidding/half tired of DC

  236. 236
    RMD Says:

    West, thanks for your thoughts.

  237. 237
    BirdsofpreyRcool Says:

    Actually, the credit market is green-ish today. IG is 9 bps tighter (-9, which is good). And the HY index is pretty close to flat (which is really good). So, can’t blame credit for the mrkt’s bad hair day today (but you sure could y’day).

  238. 238
    elduque Says:

    to everybody who contributes both with answers and questions.

    Thank you all for being here.

    Enjoy the moments- each one is precious.

  239. 239
    DrLink Says:

    237- BOP what screen do you pull up to watch the IG,HY,TED? Thanks!!!!

  240. 240
    BirdsofpreyRcool Says:

    elduque — nice comment to end an ugly week. You are so right. Thank you everyone.

  241. 241
    BirdsofpreyRcool Says:

    DrLink — i use a bloomberg terminal with a direct feed to the JPMo institutional high yield bond and CDS desk. For TED, i created a bloomberg graph that plots the different (in yields) between 3 month US t-bill yields and 3 month LIBOR. If you have access to a bloomberg, I can give you the command i set up on my “code” key.

  242. 242
    zman Says:

    Agreed ElD – thanks much gang, make a good weekend.

  243. 243
    zman Says:

    Box just above leak:

    http://news.yahoo.com/s/ap/20100507/ap_on_bi_ge/us_gulf_oil_spill

  244. 244
    occam Says:

    re 229 – you meant “Growth in longs slighted exceeded shorts…”?

  245. 245
    RMD Says:

    Trader comment was generally people were reducing positions today: longs selling some, shorts covering their index shorts. Did see committed shorts shorting aggressively though.
    Z: I did notice the sly comment about my filing system.

  246. 246
    mimster90 Says:

    zman, BOP and everyone I learned a lot again from your posts today.

    Who is this bold z guy who keeps posting :-)…lol

  247. 247
    zman Says:

    The wrap will be out on Sunday.

  248. 248
    choices Says:

    Interesting provision-I had not seen this mentioned anywhere.

    http://nestmannblog.sovereignsociety.com/2010/03/congress-enacts-obamas-antioffshore-jobs-bill.html

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