Thursday – Oil Review and Gas Preview



Market Sentiment Watch: Still weird. Better than expected durable goods and housing data failed to inspire more than a few hours in the markets yesterday. However overnight an official in China stated that it was not preparing to sell down its inventory of EU bonds. Futures went wild as the euro jumped and the dollar slumped. In energy land, BP started their top kill attempt yesterday afternoon and has stated we should know if it's successful later today.

Ecodata Watch:

  • Jobless Claims of 460K vs 458K expectated
  • GDP revision of 3.0% vs expectations of 3.5%. This was last reported at 3.2%.

President Obama Watch: The President is likely to withhold granting deepwater drilling permits  for an additional 6 months beyond the May 28th deadline originally set by his administration. Sources indicate he's thinking to start granting shelf permits again tomorrow. Earlier this week I commented that offshore oil production accounted for about 30% of U.S. production (that includes federal and state waters). The deepwater alone accounts for about 9% of U.S. oil production. Hello demand for Bakken assets and hello EPS reductions for the deepwater leaning offshore drillers (even if some don't have significant exposure to the Gulf, they will see their dayrates pressures as global utilization slips).



President Obama Watch Watch: The President will hold a press conference on the BP tragedy at 12:45 EST today and he is expected to introduce new guidelines for offshore safety inspections along with the usual fist shaking at BP and company. Drilling in the Arctic apparently is also on the chopping block. The President plans to travel to the region on Friday. ZComment: Dear Mr. President, the funeral for those 11 men was yesterday.

Helluva Hurricane Year Watch: New estimates due out June 2 but the President will be briefed this morning on what promises to be very much above average hurricane season.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today – Coal thoughts
  6. Odds & Ends


Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $7,500
  • 99% Cash
  • Yesterday’s Trades:
    • None

ZIM (Zman Inefficient Markets portfolio):

  • $6.800
  • 3% Cash
  • Yesterday’s Trades:
    • BEXP – Added (50) June $20 calls for $0.25 on the mid and easily with the stock at just under $17 on news. See site comments for details.
    • Added (5) BP June $42.50 calls for $2.50 with the stock at 42.85 as the company starts the top kill procedure. High risk and quick trade.


Commodity Watch:

Crude oil rose $2.76 to close at $71.51 yesterday, after the EIA released a decent (not bullish, not overly bearish) set of inventory numbers (see below). A temporarily weakened dollar also helped. This morning crude is up $1.50 to $2.00.

Natural gas inched up a dime to close at $4.155 yesterday. We get a fresh cut at EIA's supply numbers on Friday. Trading in gas still looks like bottoming action.  This morning gas is trading up 3 cents.

Natural Gas Preview

My number: 95 Bcf Injection

  • Weather: Cooling degree days remained relatively low last week but are set to become much more of a factor in demand this week (doubling up and quite a bit higher than normal).
  • Imports: 7.9 Bcfgpd (6.8 from Canada and 1.1 from LNG), off 0.4 Bcfgpd for the prior week. 


  • Last Week: 76 Bcf Injection
  • Last Year: 106 Bcf Injection
  • 5 Year Average: 90 Bcf Injection
  • 10 year Hi: 106 Bcf Injection
  • 10 year Low: 49 Bcf Injection

Street Consensus: 100 Bcf  Injection

EIA Oil Inventory Review

ZComment: Mixed bag of a report. Imports remained elevated leading to the bigger than expected build in crude stocks however Cushing inventories slipped for the first time in weeks which should take a little pressure off crude prices. Gasoline demand remains somewhat soft but should pick up in the very near term as the driving season kicks off. Distillate demand marked a 4th week of strength suggesting that the recent strength is a trend change and inventories have started ticking lower, albeit from very elevated levels from the five year average. In all, a pretty good report for crude prices and perhaps a better one for the refining sector.





Stuff We Care About Today

Coal Thoughts:

  • The Coal names are down an average 27% from their April peaks
    • the biggest bouncer in the group since the lows has been WLT which is up 14% since its low last Thursday.

  • Coal prices have been more resilient:

    • Western coal (Powder River Basin, clean but low BTU) is down 3% but is still up 22% year to date
    • Eastern coal is actually up 1% since the market's pullback from late April and is up 16% year to date
  • EPS estimates have been rising swiftly since my last update of the group's multiple's in early March with the exception of MEE which has seen reductions since the mine accident.

    • The names are not expensive on a historical basis but the fear of China slowing has them, if not the products which they sell off sharply.
    • The largest EPS gains in the last three months have come in both 2010 and 2011 estimates for
    • MEE is the BP of the coal industry at the moment (multiple safety and environmental issues leading up to a catastrophic failure and tragedy this year) and I would assume that one sees criminal proceedings before the end of summer there.
  • Nutshell: Stocks are much cheaper on a P/E basis now than they were three months ago and while China's growth rate this year remains in question, the quick retrenchment from recent highs is probably overdone. I'll be taking a look at coal stocks and demand in coming days. 

Below find the 3/2 and 5/26 estimates for the group:




Odds & Ends

Analyst Watch:

  • BP - upped to Outperform at Oppenheimer
  • HES - The Benchmark Co. hikes HES from Sell to Hold

186 Responses to “Thursday – Oil Review and Gas Preview”

  1. 1
    BirdsofpreyRcool Says:

    Markets are weird weird weird.

    TED Spread inched out a smidge, at 37.8bps. LIBOR was unc’d for the first time in about 3 wks, but 3mo USTreasuries rallied a bit, widening the TED Spread. Don’t like this.

    On the other hand, credit indices rallying again this morning. Off the highs, but still holding in nicely. XACStrategist thinks the current rally in credit points to a +20 on S&P500.

    IG -5 bps to +122

    HY +3/4 pt to 93 7/8 pts

  2. 2
    bill Says:

    >Dear Mr. President, the funeral for those 11 men was yesterday.

    I will never forget President Reagan on the Challenger disaster when he said

    “”they slipped the surly bonds of Earth to touch the face of God.”

    He named each person who was killed on the space shuttle and also addressed their families extending sympathy and gratitude. He spoke with great promise for the future. He states that “nothing ends here” the space shuttle program will continue.

    Obamma should say the same. Can you imagine him saying drilling will continue

    Instead he will tell us the future is with pelosi mobiles and windmills and we have to learn to use less oil while he guzzles millions of gallons getting to the function


  3. 3
    bill Says:

    Nm reported more or less in line. The headline number has one time assets sales in it. I like the name longer term

  4. 4
    zman Says:

    Thanks, Bill, what time is the call?

  5. 5
    zman Says:

    Anyone else having trouble accessing this tin can and string maintained website? Here’s one for the don’t recommend file. GKG.net. They stink.

  6. 6
    Jerome Blank Says:

    West, thank you for your vote and comments last night…I apologize for this brief response, but when the price patterns break down like they have, I essentially shift emphasis back to fundamentals combined with my mothership P&F analysis…for example, I shifted to AEZ the same day Zman did, it was one of the stocks holding its P&F buy signal thru all this…I bought KOG on the way down because I like the fundamental picture…the bullish percents are also helpful for me, it helps focus on what’s most oversold…if I’m not familiar with the fundamental picture, I also look for stocks that acted differently during the self-off, in other words what’s not going down, or at least not going down as much…

  7. 7
    zman Says:

    So GDP being revised down instead of up as expected for 1Q doesn’t matter much to futures compared to currency action. It is the 1Q figure going down so while that’s backward looking and of less value I still have to think that chains through to 2Q and 3Q and so on.

    Tom – any thoughts on NE. A 6 month moratorium on deepwater Gulf drilling is not going to be good news for the group. Also, while APC is marked up today, their bread and butter is deepwater Gulf of Mexico.

    And suddenly, DVN’s decision to punt their deepwater assets looks more than a little timely.

  8. 8
    Gtinvest Says:

    For anyone interested in pathetic old PXP Ubs presentation at 11 est:

  9. 9
    zman Says:

    JB – well put. Your charts have kept me out of trouble more than once lately and also gave me conviction to keep after HAL which looks set to start paying off. Here’s to the topkill working, not for my calls but because I really like Gulf Shores and Florida and would like to go back and fish there some day.

  10. 10
    zman Says:

    Thanks GT – I never managed to dig up a schedule for that conference, anyone have one for the last day?

  11. 11
    zman Says:

    Wow has PXP taken a beating.

  12. 12
    snuhart Says:

    Hal indicated 27.55

  13. 13
    zman Says:

    Thanks to Opco for the upgrade on BP … I probably will take profits there before the top kill news is final. I hold HAL which I consider to still be unfairly targeted in this mess and overly beat down.

  14. 14
    snuhart Says:

    BP —-44.89

  15. 15
    Gtinvest Says:

    Unfortunately yes, For all those interested in ng transport play Wprt reports earnings after the close june 1:

  16. 16
    zman Says:

    6 month moratorium on deepwater drilling. There better be a 6 month extension to the leases that are in E&P inventories.

  17. 17
    PackMan Says:

    Bill / Z

    Obama / funerals.

    I guess oil industry workers are not “workers” in the Obama lexicon.

  18. 18
    hoggzilla Says:

    Coast Guard Admiral reports looks like top kill will be a success.


  19. 19
    PackMan Says:

    Is the sector rally pre market due to topkill ?

  20. 20
    zman Says:

    Pack – you know I’m not much for politics on the site but sometimes I can’t help myself. If they had been killed at solar facility (not sure how but I’d guess possible) they would have been hailed as heroes of the future.

    Hogg – thanks much!

  21. 21
    zman Says:

    Pack – probably due to BP comments last night that said all we are seeing coming out now is probably mud, not oil. It turned brown, stocks started moving up.

  22. 22
    tomdavis12 Says:

    Z: NE presented @ UBS yesterday. Only significant change on their slides was a stacking of their Paul Romano a $375/day rig. Their rig update came out Monday. Looks like revenue will be light this quarter. My earnings are going down from 1.22 to 1.11 for the quarter. This 6 month Obamadelay will not help group. Expect the mojo to be in the Bakken Boys or others. Valueation metric NE normally trades at 2 – 3 times BV. Last night 1.12. Officially in penalty box.

  23. 23
    zman Says:

    Hogg – just read that piece. Thinking I will take profits before the President’s speech. I’m sure that interagency report which will revise up the barrels produced by the well will take back some of the gains from this morning, even if the top kill is a success. Plus, more boot on neck talk from the President may not be helpful. I’ll hold HAL a little longer.

  24. 24
    West Says:

    Thanks JB , appreciate your insight.

  25. 25
    BirdsofpreyRcool Says:

    BHO has much more important things to do… than spend time on the pesky Gulf Coast or at non-union funerals. (Sorry… but this is just over the top, imho.)


  26. 26
    BirdsofpreyRcool Says:

    If equities continue to follow credit, then SPX should be up 20

  27. 27
    zman Says:

    Tom – ATW has less exposure for deepwater in the Gulf as rollovers are for the shelf rigs, not the deep capable floaters and their big EPS boost doesn’t come until next year. Still, it will get hit as well and negotiating contracts just got better for the E&Ps in the international arena. Where do you think NE is a buy again? Are they not heavily exposed to Mex and outside of Gulf so that it means less to them (other than the negative utilization for the global fleet and resulting negative day rate effects)?

  28. 28
    DrLink Says:

    How would a ban impact ATPG? Would Obama stop current drilling or just new drills?

  29. 29
    zman Says:

    BEXP through yesterday’s highs after a sharp pullback late day yesterday with the market. Bakken, Bakken, Bakken. WLL moving back up, I just hold the common there.

  30. 30
    zman Says:

    DrL – from what I understand, just new wells and just in the deep water.

  31. 31
    BirdsofpreyRcool Says:

    XACStrategist now saying that IG is 8 bps tighter… this corresponds to SPX +35-40 pts

  32. 32
    zman Says:

    Thanks much BOP

  33. 33
    zman Says:

    In case you are bored or need a better screen saver:


  34. 34
    BirdsofpreyRcool Says:

    hearing all around that 1090 on SPX is key…

    Nicky has been spot on, during this whole time. Thank you for your comments, Nicky.

  35. 35
    zman Says:

    I second 34

  36. 36
    zman Says:

    SFY halted drilling at its Lake Washington Louisiana salt dome project (stacked pays down the sides of the dome) due to encroaching oil from BP.

  37. 37
    tomdavis12 Says:

    Z: BMO Capital downgraded NE today. I would like to see if I can see what they had to say and talk to NE before I offer some more color or a drop dead buy area.

  38. 38
    zman Says:

    Thanks Tom. Doing a little homework in the space while keeping one eye on spillvision.

  39. 39
    zman Says:

    Shorts must be sweating on the CHABR trade.

  40. 40
    zman Says:

    Anyone have news on HK. RJ cut their target after the close yesterday from $32 to $26 (probably a gas price move there).

  41. 41
    dij Says:


    That sounds like a projection of SPX 1105? Next point of resistence (May 19 low)

  42. 42
    dij Says:

    next stop for EOG is 103.62. WLL already hit its resitence at 82.86

  43. 43
    BirdsofpreyRcool Says:

    dij — interesting number, but yes. It’s based on XACS’s regression model of SPX moves on IG Credit spreads. It changes with levels and volatility (much like convexity changes duration with changes in prices)… but that is what his model is predicting this morning.

    As so much of the mrkt fear is based on what is happening in the global credit markets (witness the rumor y’day that China was going to sell Euro bonds)… it makes sense to keep an eye on what is happening in credit markets.

    IG coming back in a little, so maybe pointing to up 25-30 now on SPX. watching…

  44. 44
    BirdsofpreyRcool Says:

    Coast Guard on tape saying “Top kill temporarily stops oil flow”

  45. 45
    zman Says:

    WHX moving back up to $18. Other energy yield names moving strongly higher as well.

    re 44. Yeah, BP wisely saying “no comment”

  46. 46
    BirdsofpreyRcool Says:

    “It ain’t over ’til it’s over.” For sure.

  47. 47
    ilikericky Says:

    Any comments on how EXXI will be affected if at all by ban.Appreciate that all GOM drillers lumped as one shallow and deep.I see its flying today.

  48. 48
    Nicky Says:

    Morning all. Thanks for the kind comments. I have to say I had my doubts last night whether that 1060 -65 level would hold! Could not believe the futures when I woke up this morning.

  49. 49
    choices Says:

    Not sure I follow the BP upgrade-anyone seen the writeup from Oppenheimer?

  50. 50
    jat Says:

    fyi, was at barclays meeting with jim west on tuesday, he’d been in washington that day, said that regulators were distinguishing between deepwater and shelf moratoriums. shelf looking a lot better.

  51. 51
    zman Says:

    re 47. Good point. Shelf players going to be seeing some fund flows from players with more deepwater exposure. MCF could get a nice bounce here, especially if Eloise South comes in for them in the next couple of days.

    Choices – I haven’t seen it but the talk has been about even worst case of 3 more months of production would not be worth the hit the stock has taken and they could still keep their dividend intact.

  52. 52
    zman Says:

    Thanks Jat.

    USGS says flow rate from well has been 12 to 19,000 bopd, not 5,000 bopd.

  53. 53
    BirdsofpreyRcool Says:

    #47 At worst, there could be some sort of rule that requires companies operating in the GoM to be able to post a $1B spill bond. This would drive out ALL the smaller producers (like E21, MMR, WTI). This is the biggest FEAR. And makes little sense, given the safety track record of those companies (not to mention the people they employ).

    At best, E21 expects the permitting process will be slowed down, due to a log-jam of shelf permits filed, once moratorium is lifted. Used to be that companies would permit wells up to 1 yr in advance. But no one permits much in advance anymore, due to the requirement to post P&A funds in escrow, at the time the permit is granted (so I am told).

    E21-specific fear is that it will shut down drilling of the Ultra-Deep prospects (like Davy Jones) on the shelf. That would delay the spudding of Lafitte (scheduled for June, if I recall correctly). E21 has said that if this happens, they have more than enough lower-risk infill, extensions, re-entries, and recompletions in existing fields to keep them busy.

    But — no doubt — there are a boatload of unknowns about doing business in the Gulf in the future.

    Finally, (after listening to comments coming out of the UBS conf) it is amazing to me how many professional energy investors do not know (understand) the difference between drilling and producing in deep water and on the shelf. Two different worlds. But, babies and bathwater all went out the window over the last month. I understand “sell first, ask questions later…” But i DON’T understand how buy-side energy analysts can be so ignorant of their own sector. Oh well… rant over.

  54. 54
    zman Says:


    BP – Sold the (5) June $42.50 calls for $3.80 with the stock just over $45. I continue to hold HAL calls as a play on the BP spill and still strong fundamentals in that name.

  55. 55
    jat Says:

    Related to 53, BOP, what are the implications for PXP’s farming strategy? How much do they need to post to get a $1bln spill bond? Fully understand that’s why the stock has been slaughtered with basically all of offshore NAV gone busto, but interested in your view.

  56. 56
    zman Says:

    re 53. Thanks for the color on the timing of the P&A liability, wasn’t aware of that. Saw that insurance rates for Gomex operations are up 40% in the last 5 weeks.

  57. 57
    choices Says:

    Thanks, Z

  58. 58
    bill Says:

    25, lol wow! worse than i thought

    i was hoping e21 would get a pop after the beating

    alot of uncertainties now with the gom players

  59. 59
    BirdsofpreyRcool Says:

    jat — thank you for asking. I dumped my PXP position a while back, unfortunately just seconds before it looked like California was going to play ball (so left a lot of $$ on the table). But, I’ve been to my last rodeo with that name. Haven’t followed them since. Too many uncertainty-balls in the air. They are (or were) down as much as E21… have a friend who swapped from PXP to E21 on that relative value measurement. There are reasons why E21 can come back fully… and then some. With Cali-uncertaintly, PXP is facing a harder row to hoe on the comeback trail.

    JMHO, of course. But thx again for asking.


  60. 60
    zman Says:

    Oil up $2.20 to $73.75

    NG up a dime to 4.28; gas inventories in 5 min. Should get new supply data tomorrow so look for my usual supply slide show over the long weekend.

  61. 61
    zman Says:

    S&P through 1090

  62. 62
    zman Says:

    BP – looking to repeat that trade in a better (more leveraged) strike with less dollars risked but good delta on the calls. In other words, I’ll be uprisking. I think they get another leg up if they are successful.

  63. 63
    zman Says:

    That went faster than I thought:


    Uprisking that trade for more leverage.

    BEP – Added (20) June $50 calls for $0.51 on the mid with the stock at just under $45. I assume they leg up once more if the top kill is successful today or tomorrow.

  64. 64
    zman Says:

    104 Bcf, gas back to flat.

  65. 65
    BossmanG Says:

    Z, any thoughts about exiting HAL?

  66. 66
    BirdsofpreyRcool Says:

    XACStrategist getting his 25-35 pt rally… wow.

  67. 67
    zman Says:

    NG up 4 cents now, shrugging of the bigger than expected number, probably due to the market and due to heat this week and the hurricane forecast that the Prez is getting this morning and we will all get on June 2.

  68. 68
    zman Says:

    Boss – lots of them but I am sitting on my hands on that trade now and tempted to uprisk it as well. I think they have been taken to the woodshed in an unfair way, lots of rumors about them botching the cement job but good luck proving that and it could have been fixed if BP had not rushed things which they now seem to be admitting to. If you

  69. 69
    Nicky Says:

    Resistance now turned into support at 1090, then 1081.

  70. 70
    zman Says:

    Missed my shot at VNR, still sticking with what I said about that deal the other day though as a pretty good one. People seem to like the idea of them going to the board to raise their distribution … who woulda thunkit.

  71. 71
    elduque Says:

    I would appreciate a brief comment on GDP, I tried using the search engine, but unfortunately GDP has more than one abbreviation.

  72. 72
    Nicky Says:

    We had a clear five waves up – now to look at the pullback.

  73. 73
    zman Says:

    Just thinking out loud. I am betting there will be a real, anti fossil fuels push in the POTUS speak today. Maybe a quick play for the solars: FSLR has been walloped from $150 to $105 and is now at $113 in this latest market move. Again, I don’t know if the President will make the comment but I bet he does after having visited a solar company earlier this week.

  74. 74
    zman Says:

    Eld – re 71, understand re searches like that. Best thing to do is see when they last had news and then go to that date using the calendar at upper left. Or just ask me. This is what I wrote on them on May 6 and I don’t have much to add to that except that short interest here continues to be very, very high.

    GDP Reports Weak 1Q10 Results; Yells “Me Too” In The Chase The Oil Game

    The 1Q10 Numbers:

    * Production of 88.6 MMcfedp (98% gas):
    o up 17% YoY
    o up 3% sequentially
    o guidance for this quarter was 88 to 91 MMcfepd
    * Revenue of $40.5 mm vs $46 mm expected
    o LOE continues to dive based on reduced salt water disposal and compression costs, and a greater percentage of Haynesville wells in the production mix (which are lower
    * EPS of ($0.56) vs ($0.29) expected
    * EBITDA of $24 mm vs $27 mm expected


    * Capital spending dropped due to involuntarily completion delays.
    * Guidance:
    o 2Q of 87 to 91 MMcfepd
    o 2010: reaffirmed at 15 to 25% growth over 2009
    o Expected 5 to 10% of production will be liquids by year end.
    * Borrowing base increased to $200 mm; $100 mm in cash on the balance sheet.

    Nutshell: Worth listening to a replay of the call, but am thinking it’s in for a shellaccing today.

  75. 75
    zman Says:

    Spillvision is spending a lot of time just watching the BOP. They are looking for leaks as that has been the biggest worry … that the BOP couldn’t take the pressure. But like our BOP, so far, so good 😉

  76. 76
    zman Says:

    As always, thanks much Nicky, you have been spot on.

  77. 77
    elduque Says:

    I notice the high short interest and it continues to be on a relative basis to its peer group the cheapest. Looks like with any strength at all in NG it could pop.

  78. 78
    zman Says:

    Eld – GMXR as well if that’s the kind of play you are looking for. Or SD which is starting to bounce.

  79. 79
    Nicky Says:

    possible we will only see a very minor pullback and then on up to 1104 area which is the 200 dma.

  80. 80
    jat Says:

    re 59, thanks, I do appreciate that. haven’t followed them much myself since mid 09 when they were a good short based on more t-ridge speculation… personally, I don’t think t-ridge has been in the shares for a while and so don’t view that as the risk, think it’s all GoM right now, am trying to calibrate the future increased costs to farming from new insurance requirements.

    as a total aside, a friend was telling me the other day that jim has a wall length piece of the HS in his office, which I find hilarious. only cost 30k/acre…

  81. 81
    tomdavis12 Says:

    Z: Got a chance to ask NE a few questions. Will circle back to them next week. NONE of their customers have even brought up the topic of “Force Majeure”. There is a whole cure period with that where rig operators still receive revenue anyway. At $70 – $80/bl all their customers are happy making money. There is sidetrack, reentry, workover and completion work that can keep everyone busy even if this permit stuff continues. NE had 22% of their revenue from GOM last year. A correction to their slide. Paul Romano with continue drilling with MRO til 7/15/10. Revenue will be in this quarter and is not stacked right now. There was a delay to start up revenue for Danny Atkins this quarter. Some of the cost comments from JPM Morgan this week NE disagrees with. The company thinks their stock is really cheap. My drop dead spot is $27.5 to $28/sh. Comments from POTUS today will be important. Did ask NE about BOP’s spill bond comment. They thought that would be putting too many people out of work from the states they are trying to help (or just stupid is another way to put it)

  82. 82
    Popeye Says:

    Z, have you seen SSN’s subscription offering and share purchase plan for existing holders?

  83. 83
    BirdsofpreyRcool Says:

    stepped away… back… #75 awwwwwwwwwwwwwwwww. cute.

  84. 84
    zman Says:

    Bastard Comments from the Accuweather pro site:


    I said they would have 14-18, potential for 20.

    They came up with 14-23 ( I guess less if it mixes with rain, but more if the storm stalls..lol)

    anyway, read about it here.


    Interesting comment.. The main uncertainty in this outlook is how much above normal the season will be. Whether or not we approach the high end of the predicted ranges depends partly on whether or not La Nina develops this summer, said Gerry Bell, Ph.D., lead seasonal hurricane forecaster at NOAAs Climate Prediction Center. At present we are in a neutral state, but conditions are becoming increasingly favorable for La Nina to develop.

    A) La Nina is a given b) it doesnt make a difference..the greatest season of all time was 2005 with NO LA NINA. Moral is this El Nino, La Nina stuff is sometimes a broad brush, and the reason for the high season this year will not rely on the La Nina, but the overall pattern globally which has focussed the greatest threat of the uptick in the atlantic, the same thing that IS THE CAUSE OF THE LA NINA… The La Nina, like last years el nino,is a by product of the same thing that caused last years hurricane season to be low, this one to be higher. THE ENSO IN THIS CASE IS PART OF THE STORY.. NOT THE STORY.

  85. 85
    zman Says:

    Popeye – not since a couple of weeks ago, what’s up?

  86. 86
    Popeye Says:

    Nothing new Z but I missed that somehow. Should I be concerned as I doubled down on the dips this week?

  87. 87
    zman Says:

    Crude up $2.50 at 74

    NG up 5 cents at 4.23

  88. 88
    zman Says:

    Pop – I’m not concerned, they’re going to need the cash to get the Niobrara kicked off. I think they will have an interesting summer, still not in love but it’s cheap if someone just wants 40,000 contiguous acres in the Niobrara just north of EOG’s big project.

  89. 89
    skimo Says:

    first of many no doubt body count insulates BHO

  90. 90
    elduque Says:

    re ssn – I don’t full with options, but isn’t .60 cents for a perpetual call on the assets worth it. Why do you say it is not cheap?

  91. 91
    zman Says:

    No, I said I’m not in love with the name, as in “falling in love for the long term” but IT IS cheap.

  92. 92
    zman Says:

    re 89 – “quit of her own volition” … yeah, right. It’s called a sacrificial lamb. Hopefully Salazar gets added to the list too.

  93. 93
    elduque Says:

    reuters has a comment on hurricane season being the most intense since 2005.

  94. 94
    zman Says:

    Yeah, going to be a busy one. That’s probably what’s holding gas above $4 at the moment.

  95. 95
    zman Says:

    FSLR inching up, President speaking in 15 minutes.

    V – census story on jobs for ya, census churning workers to make 1 worker look like 8 hires. Oops.


  96. 96
    VTZ Says:

    It doesn’t surprise me. It also doesn’t surprise me that GDP got revised down. It rarely gets revised up because they need to make the recovery as good as possible. Obviously, nobody cares about revisions the same as the headline numbers.

  97. 97
    dij Says:

    Now I see, the dxy shot up at 7 AM and dropped at 9:45.

  98. 98
    zman Says:

    Yeah, dollar index down 1%, really helping lift markets and crude. Crude up 2.90 at 74.40.

    ABC and AP saying Obama fired the MMS head. Salazar says she quit on her own. What, after having her keys to the office and name badge taken? Sheesh.

  99. 99
    1520sbroad Says:

    is feed of President Obama online anywhere?

  100. 100
    zman Says:

    Obama drinking game rules:


    #4 and #7 are going to get a lot of people drunk. #10 too if you substitute “banks” for “big oil”.

  101. 101
    zman Says:



  102. 102
    1520sbroad Says:

    thanks – #100 is good stuff

  103. 103
    zman Says:


    canceled next lease sale

    canceled sale off VA

    stopped 2 exploratory wells off Alaska

  104. 104
    zman Says:

    “disaster should serve as a wake up call that it’s time to move forward on clean energy legislation”

  105. 105
    ratberto Says:

    104 – Inherent assumption in his statement is that clean energy technology is risk-free… has there ever been an energy technology that was risk-free? just wondering

  106. 106
    Jerome Blank Says:

    Severe intra-day sell off in EXXI, news reaction?…

  107. 107
    BirdsofpreyRcool Says:

    weird mrkt watch continued… MMR is still up 5.8% while E21 is about flat… huh? What did he say that caused someone to hit the sell on E21 (and not MMR)?

    By the way, since when has the backdrop for a presidential press conference been bright gold?

  108. 108
    zman Says:

    JB – dunno, maybe, no news. He didn’t really say much that would address them as a Shelf player specifically. Other than it sounds like a lot of new regulation for all of the offshore is on the way. But group also backed off sharply as S&P started to roll a bit.

  109. 109
    jat Says:

    seems like all existing deepwater wells also come to a halt.

  110. 110
    zman Says:

    Onshore oily names hanging in their better than offshores and gassy names.

  111. 111
    zman Says:

    Jat – currently drilling wells right, not deepwater production?

  112. 112
    BirdsofpreyRcool Says:

    jat — was hearing rumors about that y’day. Heard one of the majors was within a coupla days of completing a deepwater oil well… they were told to P&A and move the rig off.

  113. 113
    jat Says:

    this is what I got sent from my HW broker from the tape:


    not really sure what the accuracy here is.

  114. 114
    Hoss Says:


    he said something about temporary halt of 33 deepwater operations – did not discern between production or drilling. would that be force majeure?


  115. 115
    VTZ Says:

    Clean energy policy -> higher fiscal deficit.

  116. 116
    zman Says:

    V – yep.

    Thanks Jat

    For the most part, what the President is saying seems pretty fair and is not an overt attack on the oil and gas industry.

  117. 117
    andy Says:

    z- what companies rigs start with t.o.

  118. 118
    zman Says:


  119. 119
    zman Says:

    Re Force Majeure, I’d have to say yes, RIG, DO others get to eat that.

  120. 120
    apbd Says:

    RE 84:
    Let’s clean up the language, especially about my friend, Joe.

  121. 121
    zman Says:

    Sorry AP, my bad typing. 🙂

  122. 122
    milepost_43 Says:

    AP News Break: New, giant sea oil plume seen in Gulf


    better hope this is exaggerated and doesn’t hit the FL Panhandle…

    NEW ORLEANS — Marine scientists have discovered a massive new plume of what they believe to be oil deep beneath the Gulf of Mexico, stretching 22 miles from the leaking wellhead northeast toward Mobile Bay, Alabama………The thick plume was detected just beneath the surface down to about 3,300 feet, and is more than 6 miles wide, said David Hollander, associate professor of chemical oceanography at the school.

  123. 123
    zman Says:

    EXXI – snapping back higher, maybe you just market makers step out of the way of a seller.

  124. 124
    zman Says:

    BP saying mud on lens of ROV at riser tube, no more video from there for now.

  125. 125
    BirdsofpreyRcool Says:

    E21 bounced back almost a buck off that weird low. Very strange move.

  126. 126
    jat Says:

    Is the 6 month freeze for new permits for for all current drilling?

  127. 127
    zman Says:

    I think it is just deepwater Jat.

  128. 128
    elduque Says:

    how much is APA going to be hurt by this. little or a lot.

  129. 129
    zman Says:

    Eld – by the delay of 6 months in the deepwater? Probably not much. APC would be behind on some stuff. DVN comes out unscathed.

  130. 130
    zman Says:

    Energy group not keeping up with this continued move higher in the S&P.

  131. 131
    zman Says:

    RIG well off highs, DO, NE negative.

  132. 132
    elduque Says:

    hk having a good day. now that is unusual.

  133. 133
    BirdsofpreyRcool Says:

    In the end, Obama didn’t actually say that much. But he didn’t say anything really “bad” or “outlandish” either. He sounded pretty reasonable (given that there wasn’t any real information). In part, it is in contrast to the jelly-fish-brained Salazar. However, as with any govt (and especially this one), you have to watch what they do, not what they say. Still don’t have a good idea of what they are going to “do.” But they probably don’t know either.

  134. 134
    zman Says:

    I agree, he comported himself fairly well. It sounded very reasonable.

  135. 135
    BirdsofpreyRcool Says:

    E21 is firmly in the grip of a computer trading algo somewhere. You can see it in the runs up… and spikes down. It is liquid enough to be traded (albeit with wide bid/offer spreads), but not liquid enough to overcome a good computer algo. So, learn to either 1) take advantage of the price spikes in either direction… or 2) understand this is a volatile stock; buy right and hold. (or buy, write, and hold). Just a few thoughts.

  136. 136
    zman Says:

    Eld – yeah, onshores having a good day. Bakkens all running, HK running with other gas names, a bit better since its been a bit worse.

    Close of NYMEX
    Oil up $3 to $74.50
    NG up .13 to 4.29

  137. 137
    BirdsofpreyRcool Says:

    FWIW, credit is going crazy… if the S&P was to trade with the expected correlation to the IG Index, we would be up over 60pts.

  138. 138
    zman Says:

    SFY news story out saying Lake Washington drilling uninterupted. I saw the headline earlier saying they were pulling off. Weird. Newswires need to be more careful as I’ve been seeing a bunch of untrue stories of late coming across Reuters.

  139. 139
    zman Says:

    Thanks BOP, keep those credit correlation comments coming. Glad to see the stress hasn’t made you implode.

  140. 140
    BirdsofpreyRcool Says:

    Also, FWIW… that spike down on May 6th is not helping investor sentiment. In spite of Washington’s investigations into what caused it we either 1) don’t know (which is scary), or 2) they aren’t telling (which is even scarier).

    I suspect we get a volatile summer… I’ll bet June doesn’t start out well, but spikes near the end of the month (because of quarter end). So buckle up, it’s gonna be a turbulent ride.

  141. 141
    john11 Says:

    Today’s BEXP presentation material at Pritchard.

  142. 142
    BirdsofpreyRcool Says:

    #139 ha ha.

    Lost some chunks in the shale shaker, but I’m still here.

  143. 143
    BirdsofpreyRcool Says:

    (#142 … it’s a “BOP” joke… sorry)

  144. 144
    zman Says:

    Upstream confirming it’s deepwater permits and existing current drilling stopped for 6 month.

    Also Cramer is on saying he likes energy but throwing out names like TOT and STO. I’d be more than a little careful with STO as they may be having a well control issue at one of their north sea rigs.

  145. 145
    dij Says:

    It is good to hear some open minded comments about Obama, here. I would rathr see intelligence in charge than dogma.
    BOP, next stop 1100, that would be 40 points and the May 19 low?

  146. 146
    Nicky Says:

    This short term cycle up should last at least 4 trading days which would take us to Tuesday of next week. 1100 – 1104 should provide some resistance and likely lead to a pullback before we move higher again.

  147. 147
    elijahwc Says:

    FWIIW: Found elsewhere, the list of lotto winners. APC and ATPG standout.


  148. 148
    zman Says:

    John – thanks again. Was running through the presentation side by side with the 1Q one from the end of April.

    The new presentation shows new 2011 guidance of 10,400 BOEpd, up from the same 2010 guidance of 5,189 BOEpd. I don’t recall and can’t find mention of them being at 100% total company growth in print yet for 2011.

  149. 149
    zman Says:

    BEXP – they also list the Rogney well as completing. This is the Montana Bakken (Pale Rider) well that could be a big one for them (to the stock) this late June if it works. Shows the EOG Carat well nearby as completing as well.

  150. 150
    zman Says:

    BOP – do any of your Bakken covering guys cover AEZ?

  151. 151
    dij Says:

    Thanks! Nicky

  152. 152
    Nicky Says:

    Just to reiterate. Support is now at the 1090 area which is possibly all we will see on a pullback. I am still anticipating this moving up to the 1120 area.

  153. 153
    andy Says:

    nicky – great calls lately !!!!

  154. 154
    Jerome Blank Says:

    If BEXP closes here, the daily “shooting star” concern from yesterday is negated, we’re getting some resistance at the 20/50 SMA now, above that, next milestone, P&F buy signal at $17.50…

  155. 155
    BirdsofpreyRcool Says:

    AEZ — not really spoken about, amongst my sell-siders. But i think wcoaster has done some great work on it…

  156. 156
    Nicky Says:

    1100 did provide resistance. That may have been it for the pop in v and we now see the pullback.

  157. 157
    zman Says:

    Thanks Nicky and BOP.

    BP saying it may take 24 to 48 more hours to tell re topkill.

  158. 158
    zman Says:

    and thanks much to JB too.

  159. 159
    Nicky Says:

    euro backing off its earlier highs I see.

  160. 160
    zman Says:

    No estimate on when trans-Alaska pipeline to reopen. That’s upwards of 600K bopd offline.

  161. 161
    zman Says:

    S&P 1102. Wow.

    Guy on CNBC making a good point that of course China is going to say its not abandoning the euro since it holds so many, he’s selling this rally.

    Very strong day in all our names, I’ll look at lightening before the long weekend though.


  162. 162
    zman Says:

    BP Opco Upgrade – basically said cost will be $5 to $20B. Stock has lost $55 B mkt cap since the start. If topkill works they think it will be the low end of the range. I would think it will be higher but that’s just a guess based on thoughts on all economic costs. Still, he has a point on the mkt cap drop and on the dividend likely being safe. Now 7.4% yield.

    Also Reuters doing a story saying BP should be a takeover by XOM or Shell.

  163. 163
    BirdsofpreyRcool Says:

    does shell even do acqtns??

    and BP’s safety mentality + Exxon’s belt-and-suspenders-and-safety-pins-and-don’t-hurry style doesn’t really mesh with the BP “who cares about maintenance spending / get it done yesterday” culture. Still… cheap assets attract interest, for shore.

  164. 164
    BirdsofpreyRcool Says:

    Shockingly strong day in credit. Looking forward to what TED has to say tomorrow morning.

  165. 165
    jat Says:

    cheap assets attract interest, for the shore

    but not offshore


  166. 166
    BirdsofpreyRcool Says:

    jat — you crack me up.

  167. 167
    zman Says:

    Plus XOM just bought XTO so they obviously don’t like bargains.

  168. 168
    AAA Says:

    No Board of Directors is going to sign off on buying BP, not with the liability issues it faces.

  169. 169
    BirdsofpreyRcool Says:

    And the Number ONE answer on the Top 10 List of “Reasons that NO One Will Buy BP” goes to AAA.

  170. 170
    jat Says:

    GDP selling shares 144 offering, some director also selling, just got the call

  171. 171
    BirdsofpreyRcool Says:

    GDP — timing not great. Guess they need the money. thoughts?

  172. 172
    BirdsofpreyRcool Says:

    ugh… it ain’t over ’til it’s over…


  173. 173
    zman Says:

    BOP – nothing to really to add to 74. Maybe they have their eyes on some EFS acreage. I’m staying away.

  174. 174
    jat Says:

    no idea, I forgot to ask about use of proceeds, just started laughing at how ridiculous it was at 12.50. I mean, wtf.

  175. 175
    BirdsofpreyRcool Says:

    wtf, indeed.

  176. 176
    BirdsofpreyRcool Says:

    GDP — I own some convertible bonds there… but only b/c the equity and preferred cushion gave me some comfort that the bonds (which are putable at 100 in 4 yrs) were covered. Those bonds are at 82.5 now, for a yield to put of 9.7%.

  177. 177
    jat Says:

    I was done with them on the long side when they did this to me in December 2008. Haven’t even touched it on the other end for a few months, can’t believe it is this low and now this.

  178. 178
    VTZ Says:

    RE 162 163 – There have been Shell/BP merger/takeover rumours for at least 2 years on and off and I believe that if there was any time to do it now would be the time.

    BP could recover their market cap from the takeout premium, Shell would implement their safety procedures and policies (ie safety before everything). Shell could market it as a positive step and say that they want to turnaround the BP safety record, so even with legacy liabilities it might not look so unappealing.

    I guarantee Shell has considered the takeover and the asset divestiture implications in certain markets but I don’t think it’s farfetched at all. I can’t fathom Exxon taking them over though.

    The last Shell takeover was Duvernay… an asset that they probably paid double or triple what it would have been at the bottom. Most of the time, Shell buys into JVs.

    Regardless of who bought BP, the BP management and systems/procedures would not survive.

  179. 179
    AAA Says:

    Re 172, is there a risk that they could get gas up the riser carrying the mud and repeat the accident? Say, if they lost pump pressure?

  180. 180
    VTZ Says:

    Correction to 178 – Duvernay was probably a lot more than 5 times what it was at the bottom and double or triple what it would be now.

    That’s probably why they don’t like acquisitions.

  181. 181
    PackMan Says:


  182. 182
    zman Says:

    Pack – thanks but I don’t find that very plausible.

  183. 183
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    May’s Manic Market.

    The S&P 500’s rollercoaster ride this month is reminiscent of the Cyclone on Coney Island. If you ever rode the Cyclone, you know that the truly scary part of the ride was not how high or fast the coaster went, but the fear that it would fall apart at any moment. Yesterday’s late day sell off appeared to shake enough short term players out of the market that the overnight rally leading to the gap up opening was able to sustain its rally the entire session and even build upon the gains into the close. There have been 8 sessions this month where the S&P 500 was up or down 2% or more. This action sets up for an interesting Friday going into the holiday weekend. Five of the last six Fridays have been sessions where the S&P 500 has moved up or down more than 1.5%. With month end, pension rebalancing, the S&P 500 bouncing up against its 200 day moving average and the holiday weekend, tomorrow we will be prepared for more ups and downs.

    A couple of factors have broken in favor of the bulls over the past couple of sessions. Risk spreads have settled down. AAII Sentiment at 37% bullish has become its most pessimistic since early November and is under the buy threshold of 40% (see chart). Coincidently, this week the S&P 500 hit those same levels that it hit in early November. Although the Euro has been testing its lows, it has not registered a new low in 6 days. The monthly underperformance of Equities relative to Treasuries this month has been the worst since late 2008. These factors combined with the absence of disasters in Europe enabled the strong session today. It will be key to see if tomorrow allows upside follow through. There is upside resistance at both 1115 and 1135 and 1080 has carved itself out as downside support.

  184. 184
    zman Says:

    Looks like the GDP sale was due to a personal bind the director was in.

    Also see members of management picked up 106,000 shares.

  185. 185
    VTZ Says:

    There ya go… prove me wrong… a Shell acquisiton buys part of East Resources for 4.7 billion.

  186. 186
    zman Says:

    V, Ha!

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