Ouzo, Brats, and Apple Pie Don’t Mix Friday

Posted on by zman

 

Market Sentiment Watch: Ugly. Bulls are hibernating. I included a set of graphs in the Stuff section detailing the carnage by various group since the late April market peak. Uglier.  In D.C., the Senate passed the "Financial Reform" bill last night although many of the key points of the bill are still in flux as it heads into reconciliation. In Germany, the Lower House of Parliament has voted in favor of the Euro Zone support package with the Upper House to vote later today.  Clearly more  financial regulation will be coming in Germany and the rest of the EU in coming months. Next week in energy land we should see increased news flow out of the group (HK analyst meeting and the UBS oil and gas conference is often noteworthy) and honestly I can't wait to talk about plays and wells and anything but angry Europeans but the broader market remains large and in charge for the moment. 

 

Ecodata Watch: none scheduled today.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - From the Peak Watch
  5. Odds & Ends

Holdings Watch

ZCAT (Zman Catalyst portfolio)

  • $7,500
  • 94% Cash (essentially 100% cash as remaining positions are valued at $0)
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades: None.

ZIM (Zman Inefficient Markets portfolio)

  • $12,100
  • 69% Cash
  • Yesterday’s Trades:
    • HAL - Added (100) HAL $27 May Calls for $0.15 with the stock at $25.80. This is obviously an “Enough Is Enough”, high, high risk trade. The is off nearly $10 from the pre BP spill highs and continues to claim indemnity and continues to fall with this market on a daily basis. Otherwise I am sitting on my hands today.

 

Commodity Watch

Crude oil dropped $1.68 to close at $70.80 yesterday in a weak tape for everything. This morning crude is trading off $1.20.

Natural gas eased $0.05 to close at $4.11 yesterday after the EIA reported an "in line" storage injection (see below). This morning gas is trading up a penny.


Natural Gas Storage Review


ZComments: Injection was in line with consensus and below average due to cooler than normal weather (population weighted heating degree days nearly doubled week to week). This weekend a broad swath of the country is expected to see its first real dose of summer like weather which should serve to send cooling loads to their highest levels yet seen in 2010. However, at present we remain easily  over-stored for demand. That should still change over the course of the year as conventional production slides and programs to maximize EURs in shale plays become more widespread (choking back initial flush production).


 

 

Stuff We Care About Today

From The Peak Watch:

The following graphs are simply the moves from the market peak since 4/23 for a number of our popular commodities and names on the site. Obviously it's not a comprehensive list but you get the idea, and some of the finding are fairly surprising.

  • With the S&P 12% since 4/23, most oil service and E&P names are 150% of that move if not double or triple it.
  • The BP oil spill related names have taken a pasting including those names which by many accounts and my thinking are unlikely to bear large cost burdens going forward from the tragedy (CAM, HAL). 
  • Refiners have underperformed all year and have as such suffered less but still noticeably during this pullback. This sector is likely to get more attention as we move into the driving and hurricane season. 
  • Lastly, the coal names which had been on a tear prior to this pullback have been hit hard (call it the China Syndrome) yet coal itself has not budged. 

Other Stuff:

  • HK analyst day on Monday.
  • See the Catalyst list for a number of end of May potentially stock moving items.

Odds & Ends

Analyst Watch:

  •  Nada

 

141 thoughts on “Ouzo, Brats, and Apple Pie Don’t Mix Friday”

  2. CNBC aired video from yesterday of Barney Frank saying he had never been in favor of home ownership, but that he had worked to encourage home rentals.

    Then they aired 2005 footage of him on the floor saying he strongly supported home ownership and that there would not be a bubble in housing like the dot.com bubble.

    A) Liar
    B) Bad memory and therefore incompetent
    C) A little bit of both.

    This is no way to run a country.

  3. You know, if you put vanilla ice cream on the apple pie, I can personnaly tell you that is the making of a very bad gas encounter.

  4. Thanks for the chuckle in an otherwise very chuckle-less expiry Friday.

    Possible low open ends in a run to the close to avoid potential for weekend surprises that could lead to another Monday short cover rally. At least a few people talking about that this morning but not holding my breath.

    S&P down 10% on month, down 4% on year now.

  5. Most surprising thing in the charts today was coal prices and coal stock prices. They had a run to be sure on strong fundamentals but the miner tax in Australia and the engineered slowdown in China are taking an awfully big toll. I need to go over the available data to see if China is really slowing down that much or if its a case of going from 10% growth to 9%. The stocks have been crushed, with the move exacerbated by market moves. Given that coal prices in the U.S. have not been hit I’ll be reading transcripts to look at met coal pricing fixture comments. Seems like an over-reaction.

  6. Z: Have you looked at puts in the solar names? Is that horse already out of the barn?

  7. Tom – I think FSLR is overvalued still, problems from low cost competition from China is on the way I hear. They lose the moniker of low cost per watt provider and they lose that fat multiple. I think holding $100 is key for them. I will be watching it on a market bounce and you have me right as a put guy there.

  8. More of the Same… but maybe, just maybe, less volatility? Credit markets red, but not horribly so. Still, our Friend TED continues to head north. Not a good sign. Indicates the Flight to Quality (US$ and UST) is still in vogue.

    IG +1 1/2 bps to 128bps

    HY -3/4 pt to 92 1/2 pts

    TED Spread 34.2 bps

  10. Z: I agree with your China comments. We are officially in a risk off environment. I am looking for some stability in bond-land before we see a risk on long term investment environment again (trading will be different). You might want to post the Shanghai chart from time to time. If China is not the engine of growth our energy – commodity names will struggle from the long side. This Euro stuff is not nearly as important as China. Love to hear any others views.

  12. #5…new China leading economic index published…The New York-based nonprofit group, known for its U.S. consumer-confidence index and other data series, published its leading economic index for China for the first time on Monday. The index was up an annualized 7% for the six-month period ended March, slowing from a 10.2% annualized rise in the previous six-month period. The group’s analysts said gains in the index are still well above trend levels, but have come down somewhat in the past couple of months.
    http://online.wsj.com/article/SB10001424052748704314904575249742232331652.html?mod=WSJ_latestheadlines

  13. JB – nothing that I am aware of on the fundamentals, just oil and the market and people abandoning ship.

  15. KOG — credit facility should be announced “within a few days.” Will be looking for that!

  17. KOG — one of largest institutional holders reloading his position… would expect to see a bounce… but what a market.

  18. Credit bouncing back from the morning lows… along with stocks. Financial shares are actually green.

  23. World is all better, Goldman settles with SEC. Keep moving nothing to see here.

  24. $NYMO, just for perspective, the McClellan closed at -136.21, lower than the 2008-2009 crash…might be the lowest level in history, but the S&P did not go to new lows…, not saying by any means we can’t whoosh lower, flush out, but an interesting divergence nontheless…

  26. Seeing a short covering squeeze in the Credit CDS IG Index right now… from the wide of +1 1/2 bps this morning to now -3 bps tighter. Volatility still running the Show.

  28. Good morning all. I know, I know, right forecast, wrong day! Referring to my bad forecast for yesterday which is playing out today!! Second time this week this has happened (earlier in the week with gold) and is just not good enough!

  32. I suspect they will pull it back here and the pullback needs to be watched carefully.

  33. Choices – yes I saw that too – thought I was dreaming when I saw their close when it had been hugely down earlier in the evening. Japan I thought had limited losses last night compared to ours, Hong Kong was closed and China was actually up on the day.

  36. #30-same for Shanghai, Hang Seng. Shanghai was actually up >1% (all related to last nite’s activity).

  37. EOG has a quiver full of arrows now… have they acquired anyone in the past?

  38. I would like to think we have made a significant low this morning but unless some serious levels are taken out overhead and way above here then its not likely. The 20,45 and 90 day cycles are still pointing lower ideally for a week or so more. This would imply that the 1044 level will not hold and therefore we are likely to go down and test the 980 – 1000 level before this is done. As far as the EW count goes, despite the carnage, there are still a couple of bullish counts on the table so I am not totally giving up hope.

  39. #33, thanks Nicky-re my #36, sorry did see the date on Hang Seng-it reflected prior day’s activity.

  40. RMD – Not out of the realm, taking a look at the relative declines in the charts above you can see that someone like DVN, who has been selling assets and whose own currency (their stock) hasn’t fallen by half as much as many of their would be targets, would come out of such a deal looking pretty savvy.

  41. BOP – That’s not really part of their game plan. They did a $100 mm acquisition a little while back but for the most part they are strictly an organic growth story. Long term goal has been to get debt/equity to 0%.

  42. DVN out with a PR this morning rebuking some of Ben Dell’s downgrade thoughts from a week or so ago.

  44. z — thanks. Quick read of history (via Hoover’s) says that EOG boubht Energy Search in 2001 (Appalachian Basin). But it seems their growth strategy is organic.

  46. Thanks, JB, for your confidence-bought KOG yesterday, small amounts of a few others-we will see as I am usually early but KOG coming back strong this AM.

    will vote now-noted McClellan last eve.

  49. Nicky (or other TA folk) Re gold – I know you’re more of a EW person, but if you look at candles as well would you say that the pattern from Dec 09 to mid-May and then from mid-May to now looks like a cup and handle accumulation pattern?

    General note, the shares have been disproportionately beat down on this 5% move away from the highs with many big cap shares down close to 20%. The HUI is back towards the low end of the range and back to underperforming.

  51. KOG reiterating that they have enough CFFO to fully fund their program this year… and into next yr. There was a rumor going around about a secondary. Comany says “not needed” this year, or even next year. If a 2ndary was done, it would be in conjunction with something larger (like something with private Peak Energy). Think we hear about finalizing their bank credit facility soon. That would send a shock of relief through the stock, I would think. Nice buys on anything with a $2-handle. Still can’t believe we dropped there.

  54. Watching a couple of levels – 1182, then 1192 – both would take the immediately bearish count off the table and have some of those bears backing off I think.

  55. Haha on cue – Thanks jivey, good find.
    Also thanks DrLink. I surf BNN for clips regularly but I missed that one.

  60. copper / gold related – FCX rallying hard. Trading around longer term resistance at $66 which broke through to the downside yesterday.

    Copper has plummeted on china this week.

  62. Z,
    What do you think of GMXR at these levels.
    Also interested in thoughts on ATPG for those who follow. It has taken a real beating. It has dropped around 45% in the last month. It would seem to be a bargain at these levels unless they really get hit with the fallout from the oil spill. I have the estimated EV/EBITDA around 2 for 2011.

  63. I assume she meant 1082.

    Re CHK – I have enough for now and I do plan to hold for the long term. Long term I think they do OK. I just don’t see a reason to grab more of that here and now.

  64. To all those who contribute their time, energy, and knowledge it is gratefully appreciated.

  65. Hogg- all things being relative after this tumble, I have to say I’d be much more interested in a HK or a SWN than a GMXR. GMXR gives you a shot at big squeeze but other than that I’m not all that interested and if prices stay low there is a good shot they cut capex (and therefore their production growth target again).

  68. Apologies Baylor, I type as fast as I can while thinking. If you want me to elaborate on anything please let me know.

  69. Rodman on AEZ: reducing EUR guess on 1,400 boe/d IP well from 550-600mboe to 500, increasing IP rate so decline curve doesn’t change much. Gets 8.50 NAV at $75 and $6.00. (I don’t like EUR guesses which are too high.)

  70. Crude up a dime on equity “rally”. NG up 2 cents.

    S&P at 1083.73 approaching Nicky’s resistance band.

    RMD – yeah, that’s all they really are. AEZ territory is close to Rough Rider and we have a whopping two wells drilled so far. So while it may be in good real estate, we still really don’t know. Extrapolating the EUR over the whole acreage position premature. I’d also like to see a little production history over there (NW corner of Rough Rider if Rough Rider were square). If BEXP had a better balance sheet I could see them buying AEZ to fill in the corner but right now that’s pretty much out of the question and they are instead leasing nearby.

  72. XAC Strategist updating his credit/SPX model…. says current level in credit points to an up 20 pt day for SPX.

    IG -5bps now. Will keep an eye on this.

  74. Checking with XACS, his +20pts on SPX corresponds to -4 1/2 bps on IG. IG now -5 1/2 bps… so, that points even higher.

    Just passing along info from different (and unusual) sources. Hope this turns out to be true.

  77. FCX continues to rip. any news on china? That seemed be a decent piece of what pushed it down over 15% the last few days.

  78. voted: thanks JB!
    password was “aesthetic useless”, funny to this engineer…

  80. Baylor – voted is on Stockcharts.com – vote for JB’s set of charts and he will eventually be knighted as king of all charts.

    BOP – thanks for follow up on KOG CFFO etc. helped me off the fence there.

  82. 1520 – what does one get for being knighted as king of all charts? undying respect of your internet peers / fans?

  83. #83 – good question – I have used Stockcharts.com for a long time and JB’s chart collection is the best i have seen. Maybe they give you a special hat or something…

  84. I’m waiting until next week to take a shot at HK, will look at their presentation and listen in on the analyst day Monday and then decide, not trying to front run it given the slipperiness of this market.

  85. JB:

    REF 24: I saw your comment regarding a historic low in the Mcllelan Oscillator earlier and the divergence related to market. IMHO, this is a very astute observation and we may on the verge of a big rally.

    Also, what is your read the current level of Mcllelan Summation Index ($NYSI) and does it have any significance relative to fall 2008 levels, especially when combined with % NYSE Bullish levels?

  86. Z:

    What is your interpretation of the recent bulge in crude supplies at Cushing? It seems that OPEC now has almost 5mm/day surplus capacity, unlike in fall 2008 when there was only 1mm/d.

    Also, the fear trade keeps driving massive amount of funds from the Euroland to US shores and the price of dollar keeps going up. Since commodities like oil are priced in dollars, how does this dollar appreciation affect energy prices?

    Finally, is it correct to maintain a bullish posture on oil prices, especially when buying wasting assets like near month options in oil cos?

  87. Re: #86 guru, thank you for the kind comment…I will need to look into $NYSI a bit more, I have not referred to it before…I will keep you posted

  88. Re 87.

    Cushing bulge coming from a combination of higher Canadian and North Dakota Bakken volumes headed south. Seasonally you see a rise in Cushing volumes due to the Spring maintenance turn for refiners in the mid continent. The extra volumes from the north are adding to this bulge. This should come off soon as those refineries key back up for the summer driving season. It should not be an OPEC issue as imports to the U.S. have remained low and the Gulf Crude doesn’t get up to Cushing directly so it would be a regional function of volumes going to Cushing instead of getting into other markets. Again, I think we top out there soon and start heading back down.

    Dollar goes up, price comes down as you can buy more barrels with the same dollar.

    While OPEC does have spare capacity you have to question the nature of what’s available to turn on quickly and who controls what. Saudi has light volumes available which they can bring on and which would depress price. But others with capacity like Iran have heavier and sour capacity in their back pocket, lower grade crudes which require more refining. Iran will likely not listen on quota tighten but Saudi will likely keep their production more in check if prices remain here long.

    On the last question, my thought is that oil doesn’t stay down here very long and the moves in the oilier names are overdone.

  90. Rig counts: This is do not understand?
    N.A. +64, Canada +52, US. +12, Oil -6, NG +18. Please tell me what E&P’s are doing ?

  91. Canadian rally is most of that figure and that’s spring break up related.

    NG up 18 is just weird until you look where the numbers were.

    Louisiana down 2

    Texas up 11

    Okla up 5

    Those last two are a function of Eagle Ford and Granite Wash. Both plays can be liquids rich and I’d bet that the additional rigs are targeting the oil window, especially in the Eagle Ford. Over in Granite Wash (both Texas and OK panhandles) there is plenty of opportunity to drill pure gas wells with IRRs in excess of 25% at $4 gas, and with the 12 month strip I get that. Note also the slow ebb we’ve seen from the Haynesville over the last few weeks (or at least out of LA). That’s a function of a reallocation of drilling assets to the more liquid rich plays.

  92. Z:

    Ref 89 – Thanks. The senate has passed the Finacial reg. This will severly restrict prop trading (massive leveraged future contracts) in energy by GS and its hedge fund clients. This was mainly behind the big push in oil from $65 to $87 in six weeks and is unlikely to be sustained.

    IMO, the current bullish posture on this board is not supported by global fundamentals. The Eurozone with $14T GDP (slightly bigger than US) is contracting. Japan with $6.5T is also contracting. The only GDP expansion is in Emerging Markets (mainly China, India and Brazil) with a combined GDP of less than $5T, while US with $14T GDP is also showing a moderate growth. Lots of spare capacity currently exists within OPEC and Russia. So, purely on a macro basis, have to respectfully disagree with your bullish posture on higher oil prices.

  93. Mexico, U.K., Norway all in current decline. Russia is expected to be sideways at best this year. It is generally accepted that non-OPEC sources will significantly decelerate in 2011 as declines accelerate in these areas. OPEC is not simply going to dump barrels into a market that can’t accept them. Meanwhile demand is increasing from Latin America and the U.S. I see the U.S. growth weekly.

    Take the EIA forecast for a minute so I’m not in it. Their supply forecast is non-OPEC up 600,000 bopd this year and 60,000 bopd next year. The EIA is far from perfect but they generally have been in the ball park on this.

    Look at their demand forecast. Up 1.6 mm bopd in 2010 AND another 1.6 mm bopd in 2011.

    I’m not looking for a return to $150 oil next year but I think it will average more than this year which I put at the $80 to $90 level by 4Q for an average. I think OPEC wants a better band than current levels and will work to make sure they don’t get into a falling market, falling barrel environment where they have to make drastic cuts again like in Fall 2008. Know that in my thinking I’m looking for a continuation of a recovery in U.S. demand, slowly but surely with no double dip in the equation. China, India, Europe, Mexico, Latin America demand rising as well over the period.

  94. It’s also helpful to look at refinery throughput through the downturn. U.S. financial systems ground to a halt in late 2008 and oil tumbled on the perception that the decline in GDP translated directly into lost barrels of demand. That simply wasn’t the case.

    One of the mistakes I made over the last 6 weeks was ignoring my own comments about oil running higher out of the base in advance of the more slowly rising evidence of demand recovery. I said then that when oil moves higher quickly like that it rarely ends well. The pullback was worse than I thought it would be as other elements contributed to the slide (a rapidly falling equity market leaving only two assets that anyone wanted to hold (gold and the dollar). Live and remember and learn.

  95. have you ever done much work on SU? I have just started a new long position. Reasons:
    1. Canada
    2. Non offshore
    3. Alberta Gov’t rescinded new royalty tax
    4. Contango in oil points to higher prices.
    5. Open to any points of view that disputes above or encourages me to add to the position.

  96. #93-94 – i think so much of where crude is headed depends on cars and trucks on the road. I have seen demand in the US begin to increase via the weekly EIA stats – i think this continues.

    There are far more sophisticated analysts with models and spreasheets but i think it really comes down to tires on the road.

    I think China auto sales are another statistic lost in the debate over cushing – there have been 6.1 million cars sold in china in the first 4 months of 2010. Roughly 1.5 million a month = 18 million a year. that is a staggering amount of gasoline demand for many years to come.

  97. ElD. – re SU, my thinking is stale there. VTZ is your best thinker in the space by a mile. I would just say that right now, in this market, its a bet on higher oil prices. No higher oil, it’s a fight for that one to move up for any length of time, based on how it has historically traded.

    Guru – did that make sense to you? Feel free to poke holes, I appreciate you comments.

  98. 2 hours until the close. BOP – how’s that x asset guy seeing things now.

    Nicky, care to call the close?

  100. I’d agree with with most of the macro above, and chime in on the following. Guru’s quite right about the implications of European GDP on energy demand, but if China keeps going, downward revisions to eurozone energy demand shouldn’t materially affect balances, especially in the face of continued supply declines. It’s a matter of who’s driving the bus on incremental demand, not who’s biggest in terms of GDP. Just for reference, Europe eats 15mn bpd, US 19, China 8.5-9.0 (but they were 8.00 in 2008 alone).

    Forecasts for this yr and next for the eurozone are already declining anywhere from down only -.15 to -.46. Meanwhile China comprised about 2/3rds of non OECD growth last year and should be growing anywhere from .45 to .76 this year. They are the ones driving this bus.

    This is not to be pollyanish, as all of the above rests on the assumption that China does keep on growing at a reasonable rate. If you believe we’re entering a global double dip, then demand will collapse once again and we could fall back to industry cash costs and OPEC pain levels, all of which were pretty clearly established in the last downturn.

    That’s the bet, in my view, and right now I line up with 94

  101. I think another major determinate of the price of oil is the price of the dollar.

  102. Re 98, VTZ will probably disagree with me but I’d rather own CNQ. It’s cheaper on EBITDA (though there are reasons for that as everyone will say SU is more oil sands and so deserves a higher multiple because of the glorious 1,000 year asset base), the near term growth prospects are better from a production perspective, the free cash flow is greater, and the historical execution (doing what they say they’re gonna do) is superior.

    But I wouldn’t sell SU down here at all, and they’ll be doing marketing next week which could support shares. All the same oily bet in the short-term, I just think that if you’re right on oil CNQ outperforms longer term. Full disclosure, I bought SU in June / July 2009 around this price and sold in January and early April. The April production numbers for SU were fantastic but they’re going to be somewhat unsustainable over the next few months.

  103. I know that I am driving to destinations now versus flying: less flights to certain destinations along with securiy/carry-on limitations.

  104. Z:

    If we see any of the European banks default due to the collapse of the euro zone sovereign bonds, we may see a return of high LIBOR costs and freeze of credit again similar to fal 2008. The fear of liquidity running out is a major threat to all commodity future quotes.

  105. I agree 100% with your fundamental anlaysis. However, credit freeze and/or drying of liquidity is a strange beast.

  107. Ignore the ALL CAPS… but, got this text msg from XACS about 30 mins ago… his current macro thinking —

    This is why you BUY… OR… SHORT

    “We had such limited access to funding last summer, we almost were trying not to make loans,” said Dan Berce, chief executive officer of Fort Worth, Texas-based lender AmeriCredit Corp. “Early this year, we looked at how loans were performing in Texas, California and much of the Northeast and liked what we saw, so we decided to lower the bar.”

    WE CONTINUE TO BELIEVE THAT FINANCIAL FIRMS ARE GOING TO LOWER THE BAR AND ATTEMPT TO GENERATE REVENUE THAT THEY HAD BEEN LEAVING ON THE TABLE FOR THE PAST 2-PLUS YEARS…
    THIS EXPANSION OF CONSUMER CREDIT IS CRITICAL IF THE ECONOMY IS GOING TO MAINTAIN ITS RECOVERY AS GOVERNMENT STIMULUS PLANS END…..

    The opposite argument..

    IF YOU THINK FINANCIAL COMPANIES ARE GOING TO SLOW THIS PROCESS OF EXTENDING CONSUMER CREDIT AND CONTINUE TO SHRINK THEIR BALANCE SHEETS BECAUSE OF EUROPEAN SOVEREIGN CONCERNS … THEN STAYING SHORT IS A GOOD POSITION TO BE IN……….

    Conclusion
    We believe consumer credit expansion will continue…indicating that the recovery will continue…

    Other than exploiting short term trading decisions, we expect that it will be painful to remain a determined bear once it becomes clear that consumer credit will continue to expand….

    MJ

  108. Ram – yeah, and for what it’s worth, I have not been seeing any kind of rally in kerosene demand. Flight traffic must still be sliding, just really crowded on the planes.

  109. Sprint Nextel (S) announced their new $2.1B credit agreement today. You do not see headlines like this during a credit crisis.

  110. Getting emails and questions from friends about UNG and natural gas. UNG I still don’t like but the chart is interesting. Natural gas I still expect to be range bound but weather in the form of heat and hurricanes could help in the medium term (sorry Ram but they are a fact of life). On the production side, this stall in drilling is OK but not enough and I don’t expect major slippage until later in the year. Companies have realized that growth targets and IPs are not what gets your stock up but instead discipline/caution. So we see less open choke production at lower gas prices and the end of drilling to hold land mid next year for the big guys. That’s when I think gas can perform but it will be at least partially offset by LNG unless China and India just keep growing at breakneck pace. When prices bounce above $5 I would expect a pretty immediate response from LNG. Hopefully by then we will also see higher chemical production along the Gulf Coast to soak some of those volumes up before winter sets in.

  111. My Idol, Lee Cooperman, added to his position in PMI last quarter. PMI is not only purely exposed to the consumer-debt, homebuyer market… they are also levered to triple-C levels with debt. If you’re Lee, then you are making a pretty big, leveraged bet on the comeback of consumer financing… that said, maybe he sold the entire position since his 13F report from 3/31/10. But Omega Advisors is not known for being day-traders… or even swing traders. They are best at “special situations.” Those things can take a yr or two or three to play out.

    Just a few thoughts…

    IG -4 1/4 bps… this roughly corresponds to about +16 on the SPX on XACS’s model.

  112. But, hey… the World’s a Big Scary Place right now. And the GGG (our Govt) is on a tear. So don’t have much (other than what I see in the credit cycle) to throw in the face of Bears. It is a delicate balancing act, for sure… and one that is prone to being pushed around a lot.

    Note to self… if/when VIX gets back to 20, buy some VXX. The World is still a scary place.

  115. BOP

    13F season

    Cooperman shows reduction of EXXI from 13,722,400 to 3,963,680 (-71.12%)

    1 for 5 was effective 1/29. Do you think some of that “decrease” was due to the reverse split or actual reduction.

    MSD(Dell)and Mt. Kellett(McGoldrick) also large reductions in positions.

  117. Hoss — looking at my bloomberg holders screen for EXXI…

    Top 4 Holders change in 1Q10 holdings

    Omega Advisors +1,219,200 to 3,963,680
    MSD -1,227,417 to 3,226,343
    Mt Kellett +267,317 to 3,176,343
    Ranier Invesment new position at +2,300,864

  120. Z: My perception is D Kass did very well with the MAR ’09 bottom but got out way too early.

  122. regarding the supply-demand debate for crude:

    Matt Simmons was on TV recently & he states flatly that the alleged OPEC spare capacity simply does not exist. Now if we suppose that it is mostly a work of fiction, that doesn’t mean that it won’t affect the crude markets. Spare capacity will be trotted out endlessly by the shorts , whether or not it exists.

    Its non-existence won’t matter until it matters. So volatility is natural but also rather confirms the idea that supply-demand is tight. If it wasn’t tight, then fluctuations in economic sentiment wouldn’t cause huge swings in crude.

  123. Random thoughts RE 98/103 and the space in general:
    -The appeal of oil sands has fallen off a cliff (in favour of bakken/cardium and other unconventional oil) and was finally catching steam as oil price approached the critical 95-110 $ oil price that makes new mines/upgraders economic again.
    -That being said, Suncor/Syncrude/Albian operating costs are still ~30-35 $/bbl and there are in no danger of not generating cash
    -The Suncor 330 kbpd number COULD be sustainable if it wasn’t for the Vac unit turnaround coming up. Ultimately it all depends on reliability and I could discuss at lengths the reliability issues in the oil sands. I would say that they will probably focus on operational excellence and have taken the chance to do opportunity maintenance during the fire repairs so after the Vac turnaround (which started this week) they should be in tip top shape.
    -Suncor also has their coker turnaround next year so that could also put a damper on things.
    -The royalty change does not impact oil sands
    -Suncor asset divestures will help fund growth-Growth wise, Suncor now has much better prospects at all price points (post-merger) and they should complete the new naphtha hydrotreater this year which will help increase margin and reduce coker naphtha sales which downgrade margin and reduce your refiner customer base (coker naphtha eats catalyst for breakfast = increased costs for a refinery).
    -Firebag provides a similar growth opportunity to the CNQ insitu assets although because of Suncor’s larger upgrading base they can maximize the margin more effectively than CNQ.
    -Both CNQ and SU have large high quality resources although SU has more land that is close to existing assets.
    -CNQ has room to grow in becoming an effective operator and as such should improve production numbers going forward.
    -The CNQ growth profile is also good with several insitu projects in the short term and the Horizons Expansions in the long term.

    -Ultimately, I think INVESTORS (think ZLT) should own both and at this point I like CNQ and SU better than COS which I had liked more in the past when oil prices were lower and there was less hope for growth opportunities.
    -Going long at these levels in SU only has oil price risk. The stock has been pummeled since the acquisition and the fires.
    -Going long in CNQ at these levels offers decent long term technical support and I would take no issues with that either.

    In terms of capital expenditures and growth going forward, I believe that most companies with existing assets will be trying to grow off of cash flow generation as much as possible with little debt (we all saw what happened to overleveraged players like OPC). Materials costs have decreased since the boom but labour costs in Alberta are still high and account for the majority of the costs. The strong CAD$ will help reduce material costs as well.

    I expect significant insitu growth at anything above 50$/bbl and mining/upgrader growth once prices can sustain 95$/bbl for a year or so. Mining growth is going to be the main driver of the shares in the longterm although insitu growth is going to be what bridges the cash flow gap to get them there. Ultimately both Suncor and CNRL want to be 1,000,000 bbl/day and 500,000 bbl/day mining/upgrading beasts respectively and they are using their other assets to get them there. I believe this was the main drivers for the PCA/SU merger/acquisition.

    An alternative that people don’t often talk about is the mining/bitumen blending option that Imperial Oil is taking with Kearl Lake. The Primary benefit is taking advantage of a tigher light/heavy differential while also developing a mine that could be expanded. Because you have already invested the capital for the mine and are generating cash flow (albeit at lower margins), you could expand your blending facilities to include upgrading units to capture an increasing light/heavy differential in the long term at a lower incremental capital cost.

    Bottom line, own both and you’ll be laughing in 2-5 years and here isn’t a bad point at all to take a starting position.

    Feel free to ask more Qs

  124. FWIW, I still think of CNQ as an E&P company that happens to have a mine/upgrader which increased its profile among foreign investors looking for oil sands assets during the boom.

    I now think of SU as an integrated heavy oil company with a mish mash of assorted E&P assets.

  125. Stop with Hurricane talk. NG will get help from increased industrial demand and a torrid summer.

  127. Ram – it goes to psychology in the market. Busier than expected season. If you go into the season and get no storms early on it will be seen as bearish.

  128. Upstream saying HK has completed the midstream deal in the Haynesville for $921 mm, up from the $875 mm previously announced.

  129. Fine, then lets hope for the Hurricanes that give platform operators plenty of time to evacuate, screw up distribution/infrastructure, and do not make it to land.

  131. Re 124, I can’t disagree with anything there. Excellent insights. Wow, I’m pretty agreeable today!

    My worry about the sustainability of the 330kpd rate was indeed (1) the near-term turnarounds and (2) the fact that they hit 330kpd in part because they had a lot of bitumen stored that allowed the upgrader to run at such high utilization– and you only had those extra stocks b/c of the fires! Of course, when they actually do get humming, one can hope that enough bitumen is always available to maintain that rate…

    Bottom line, if you’re right on oil than you’re right on the names at this point. For SU, I think so much has gone wrong operationally YTD, and so much has been revealed / fixed, it’s hard to see execution issues providing a negative surprise from here.

  136. zman #90 you did, thank you.

    Do you have also have time frame for LINE?

    How does WHX or other MLPs get away with saying they have 14 or 15+ years os assets when most of their assets play out in a much smaller time frame?

  138. Obama headlines this morning:

    “Offshore drilling can only go forward if there are assurance gulf oil spill won’t be repeated”

    “Pledges to hold BP, Halliburton, Transocean “Accountable” and also to make sure Washing learns lessons”

  140. LNG port off Gloucester Mass. coast now open for business

    Neptune is the second offshore LNG port to open off the north shore since 2008. Five miles to the west of Neptune is the Northeast Gateway port, owned by Texas-based Excelerate Energy.

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