01
Jun

Wednesday Morning

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Market Sentiment Watch: Yesterday was brutal. Complete baby and bathwater mode. Valuations are extending on the cheap side for several names, especially in the onshore E&P group where you can probably trust consensus estimates to not be too far off the mark. Not a lot in the way of news in energy land as is typical during this short week of the year but that should change next week as companies roll out late quarter operations updates. It will be nice to see news again affect names in the group instead of just market volatility and the latest shots from the BP Spill cam which have so far not done much to help the onshore E&P cause. Note that due to Memorial day we won't be getting oil inventory numbers until tomorrow and after the natural gas inventories are released.

Ecodata Watch:  We get pending home sales at 10 am EST and auto sales later in the day. Data releases crank up starting tomorrow and culminating in what's expected to be a big payrolls report on Friday. See link to ecodata estimates here.

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today – SSN thoughts, BP thoughts
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):

    • $7,500
    • 99% Cash
    • Yesterday’s Trades:

      • None

 

  • ZIM (Zman Inefficient Markets portfolio)
    • $3,500
    • 3% Cash
    • Yesterday’s Trades:
      • Added (10) BP June $45 calls for $0.21 with the stock at $37.70, gapping lower on their failure over the weekend. BP is now down 40% from it’s pre Macondo failure highs.


Commodity Watch

Crude oil fell $1.39 to close at $72.58 yesterday on weak equities and a resilient dollar after trading as high as 75.33.  This morning crude is trading flat despite a strong dollar. Note that Iran overnight said it would exchange 45 billion euros for gold and the dollar.
 

  • Iran Watch: More sanctions are apparently on the way via the U.N. Expect more threats from Iran in response but little in the way of actual crude moving action.
  • Early Read on Inventories: (according to the Platt's Survey)
    • Crude: DOWN 1 mm barrels
    • Gasoline: UP 750,000 barrels
    • Distillates: UP 950,000 barrels


Natural gas fell $0.09 to close at $4.25 yesterday. Still range bound but holding up better than expected following bearish supply numbers. This morning gas is trading up 4 cents. 


  • Weather Watch: Cooling Degree Days rose to 47 last week, 57% above normal and year ago levels of 30. The forecast for this week rises again to 58 CDDs, well above year ago and normal levels. 
  • Imports Watch:  8.3 Bcfgpd, up 0.4 Bcfgpd from the prior week, in line for this time of year.

    • LNG up 0.1 Bcfgpd to 1.2 Bcfgpd ... still nothing to write home about
    • Canada was up 0.3 Bcfgpd to 7.1 Bcfgpd.

 

Crack Spread Update

Key Thoughts:

  • Crack spreads continue to outperform year ago levels.
  • The market could care less.
  • We did see one firm upgrade the sector yesterday ... to Hold.
  • I don't think anyone cares until we see a pick up in gasoline demand, which was outperforming recent trends in early Spring but has backed off in the last several weeks.
  • They may also care when the group, still beat down, starts beating on 2Q earnings.
  • For now, I'm sitting on my hands here.

 

Stuff We Care About Today

SSN Subscription Thoughts

What's The Deal?

  • Offering 123.5 mm ADS to shareholders
  • Use of proceeds: Acceleration of Bakken and Niobrara drilling programs. Getting this deal done is key to them getting to the next level. While the Bakken results have been good, they have very limited running room in the play and will need to use cash flow from wells there in addition to this deal to get a potentially stock moving Niobrara program off the ground.

Nutshell: I own enough. I won't get into hypotheticals of "would I buy it if I didn't own" because I already do and I'm not planning to hold this one forever but I would like to see initial results from their Niobrara program sometime late this summer. But I will say that the main reason for me not adding to my position here is that I simply don't care for this market and it's flight to liquidity which may put names like this at a further disadvantage than they normally suffer from.

BP Thoughts

Just before yesterday's close, the Justice Dept. confirmed it had launched criminal and civil investigations into whether or not BP has violated U.S. environmental and other laws. BP said that the investigations were launched weeks ago and that it was cooperating.  Most estimates now range in the $20 billion region for plugging the well, clean up, and damages and fines. This is obviously a very preliminary figure and has jumped 4x in the last two weeks. BP issued a statement noting that they put their share of the clean up at $3 billion over the next 6 months and that they have no plans to cut the dividend.   That sounds light at first blush but recall, BP only has 65% of the well and APC has been called to testify as a responsible party (resulting in a 19% drop there yesterday).

  

Here's a little back of the envelope exercise: (All comparisons are 4/22/10 to 6/1/10)

 

Total Enterprise Value:

  • Then: $213 billion
  • Now: $140 billion
  • Change: Down $73 B or 34%

Value of Non Exploration and Production Reserves (Refining segment). I like price to sales for this as the ball park on big non-integrated or independent refiners is a small one.

  • I used VLO, TSO, and SUN to give me an average P/S of 0.11x.
  • BP had trailing twelve months refining revenues of $236 B (that's just from the refining and marketing divisions).
  • Using the P/S ratio above, this puts those assets at $26 B of BP's TEV.
  • Leaving $114 B in assets for BPs other stuff ...

... Which Leaves Their Reserves:

  • Reserves at end of 2009:
    • 18.292 billion BOE
    • yielding a reserves valuation of $6.21 / BOE

Nutshell: $6 per barrel of oil equivalent is cheap for anyone. They could obviously sell assets, if need be, for higher than this in the market ($10 to $15 BOE fairly easily) and build cash on the balance sheet to pay claims. For now, I view this as a trading vehicle and not any kind of investment. With the increased volatility and the recent bashing there should be plenty of days for it to rally off spikes down like yesterday's. But, since the market has a way of swinging way too far in one direction, the current trend is still well in place towards weakness.

 

Other Stuff

  • I'll have an updated Catalyst List out tomorrow

 

Odds & Ends

Analyst Watch:

  • VQ - upped to Outperform at Wells Fargo
  • BP - UBS cuts target price to 580P from 630 P, keeps Buy rating
  • SPWRA - initiated at Wunderlich at Hold, target $14
  • SPWRA - resumed at Kaufman, Hold, target $11

Interesting Article Watch:

 

157 Responses to “Wednesday Morning”

  1. 1
    zman Says:

    This could be a problem for crews working on both containment and clean up.

    http://media.myfoxtampabay.com/myfoxhurricane/

  2. 2
    zman Says:

    SD and ARD announcing amendment to deal, don’t have details yet.

  3. 3
    zman Says:

    Looks like slightly better terms for ARD, plus another 30 days to shop themselves to others and a lower termination fee if they find a better buyer.

  4. 4
    zman Says:

    Moody’s CEO – “Subprime mistakes deeply disappointing, company working to fix problems” … gee thanks.

  5. 5
    zman Says:

    Hedge funds seen picking up BP shares:

    http://www.forexyard.com/en/news/Hedge-funds-seen-picking-up-BP-shares-traders-2010-06-02T123442Z

  6. 6
    milepost_43 Says:

    Halibuton to Provide Update on GOM Op’s —

    12:55AM Halliburton to provide update on Gulf of Mexico operations (HAL) 21.15 : Co announces that it will provide an update on Gulf of Mexico operations during a conference call hosted by Credit Suisse on Wednesday, June 2, 2010, at 10:00 AM CST.

  7. 7
    ram Says:

    The service guys can become too cheap as well? Buy and hang on?

  8. 8
    ram Says:

    HAL can atl east redirect their guys to land from shore if land drilling picks up.

  9. 9
    zman Says:

    Thanks MP.

    Ram – I think they get there this month. A lot of uncertainty over who the government is going to go after is the first issue and the second seems to be how much business will be lost due to the deepwater closure. The deepwater business as a % of the whole is relatively smaller for the bigger names like HAL and SLB. I think the present moves are overdone.

  10. 10
    zman Says:

    re 8 or move them to other offshore basins.

  11. 11
    milepost_43 Says:

    TGA another 250bpd well….
    TransGlobe is pleased to announce that oil was recovered on test from Safwa NW-1, its latest exploration well in the East Ghazalat Concession in the Western Desert of Egypt. Wire line logs across the Lower Bahariya Formation confirmed approximately 30 feet of net, producible oil-bearing reservoir with an average porosity exceeding 20%. A 14 foot interval was perforated and tested at a rate of 250 barrels of light, 34 degrees API oil per day. The well is currently suspended awaiting a full test.

    The Safwa NW-1 well is located 2.5 kilometers to the northwest of the Safwa #1 discovery well which tested 300 barrels of oil per day from the same formation.

    Fracture stimulation to increase oil production rates from the Bahariya Formation is also being investigated.

    http://finance.yahoo.com/news/TransGlobe-Energy-Corporation-iw-695368292.html?x=0&.v=1

  12. 12
    zman Says:

    Dollar moving higher, again, up 0.5%. Crude just under 72.

  13. 13
    zman Says:

    TGA still in the to do bin.

    I wonder how one gets on that HAL call, don’t see a link on their site.

  14. 14
    REgards Says:

    re13: Interested parties may participate in the conference call by dialing (866) 327-2267 within North America or (706) 758-9648 outside North America, approximately 15 minutes prior to the call’s start time and providing the conference ID 79553748

  15. 15
    zman Says:

    BP spill group set to open higher.

    REgards – muchas gracias!

  16. 16
    zman Says:

    BP Spill watch: TPH putting the spill liability at $35 to $40 billion.

  17. 17
    BirdsofpreyRcool Says:

    Particularly liked this TPH comment this morning —

    Stock market starting to think about worst case scenarios – We’ve heard investors discussing everything from BP throwing in the towel on US business (give all the assets to the US government and walking away from the American subsidiary), to BP going Chapter 11 and then all the other companies get dragged down with it, to the Macondo well not being capped/stopped ever and it flows until the oil is depleted. Deep value guys, hope you are listening as this is the kind of scenario analysis that happens when blood is in the streets (or oil is in the waters).

  18. 18
    zman Says:

    Market seems to like the idea of HAL holding a CC vs others staying fairly mum.

  19. 19
    zman Says:

    BOP – how’s credit today? Any comments from head trader?

  20. 20
    zman Says:

    With little to no news out of the group, the market is absorbed with anything out of BP and co on Macondo so apologies for what is probably overkill on the subject. Rest of group mostly green but cautiously eying the S&P which looks pretty nervous itself.

  21. 21
    BirdsofpreyRcool Says:

    Geez — talk about “summer trading conditions” already. Credit is largely unch’d and HeadTrader is snoozing.

    Also not seeing debt deals getting done. But with mrkt in a bit (ha!) of a turmoil, deals are sitting on the sidelines. Historically, the debt market closed up shop and headed to the Hamptons by the 3rd week in June. Any company who even tried to issue debt in the summer was consider lame and pathetic and as such had to pay a premium to get their deal done. So, maybe summer has just come 3 wks early.

    TED about where he was yesterday too, at 38.5 bps. Really really want to see TED drop back below 25….

  22. 22
    BirdsofpreyRcool Says:

    Pending Home Sales at 10… maybe mrkt will take a cue from that.

  23. 23
    Alhambra Says:

    Spoke with friend who does oil infrastructure in China yesterday; he says there has been NO slowdown whatsoever. Development has moved inland, and remains as fast as ever.

  24. 24
    zman Says:

    Thanks BOP, thought so, trying to stay awake myself.

    Coast Guard saying BP hopes to finish cutting marine riser today. Blade got stuck last night.

    Thanks Al. Lots of mixed messages on China at the moment but everything I see in terms of oil, coal, and natural gas demand has been full steam ahead. Same for India.

  25. 25
    BirdsofpreyRcool Says:

    Home Sales bettern expected at up 6% MoM and up 24.6% YoY.

  26. 26
    zman Says:

    Grabbing a cup of coffee, back before the HAL call.

  27. 27
    Nicky Says:

    Good morning all. There is a 21 hour cycle which should make its low around now and allow us to move higher. Support is at 1070,1066,1060,1056. Resistance at 1079 and 1083. We may see a chop back and forwards for a couple more days before moving higher. So perhaps back up to the 1090 area and then down to 1075 ish. Just one possibility.

  28. 28
    PackMan Says:

    RIG getting killed again

  29. 29
    zman Says:

    Thanks Nicky.

    I should go get coffee more often, greener screen on my return.

    HAL call in 20 minutes.

  30. 30
    zman Says:

    Pack – re RIG, D.C. taking a harsh stance on their attempt to limit liability in court.

  31. 31
    PackMan Says:

    Down more than BP ?

  32. 32
    zman Says:

    Pack – yeah, I don’t think they have liability here but it’s up in the air right now and their CDS costs have blown out, up from 183 bps to a record for them of 590 bps.

  33. 33
    zman Says:

    Hurricane Watch:

    Colorado State ups forecast from 15 to 18 named storms. Sees landfall probability of a major hurricane at 76%, up from century average of 52%.

  34. 34
    PackMan Says:

    saw that cds; crazy

  35. 35
    PackMan Says:

    should have stuck w/ HAL today instead !

  36. 36
    jat Says:

    Prayer to HAL mgmt: please do not spend thirty minutes talking about the physical process of well cementing.

  37. 37
    zman Says:

    HAL call starting now, will keep you updated.

  38. 38
    zman Says:

    HAL 8K just filed:

    http://biz.yahoo.com/e/100602/hal8-k.html

  39. 39
    jat Says:

    Seems mostly inline with TPH estimate revisions.

  40. 40
    zman Says:

    HAL on new MMS rules for deepwater:

    Stop drilling
    Don’t spud already permitted
    More strict permit rules for safety

    Does not include workovers, well completion operations, water injection wells.

    Customers are:
    working on temporarily abandoning those 33 wells affects.
    also looking for clarification of what is and what isn’t included in the new rules.

    … more in a bit…

  41. 41
    VTZ Says:

    RE 23/24: The only people who say China as a whole is a bubble are the talking heads who read too many Bloomberg headlines and wire notes. All business people and anectodal evidence points to continued growth and increased commodity consumption. Reports are also out that commodity stockpiles have been reduced and they will need to replenish those at some point.

    Real estate is perhaps the only frothy area but no where in the world is the real estate bubble the same as the US was because of the rules and incentives around owning a house. Take Canada for example. I could trade my home in Edmonton, Alberta for 3 of the same house in many US cities and RBC and TD Bank cite that my house is ~15-20% overvalued. But if the market collapsed, I would be held liable for everything I owe unless I declare bankruptcy. The rules in most places worldwide are not as succeptible to the same kind of bubble that much of US “growth” was based on.

  42. 42
    zman Says:

    HAL comments on their own exposure:

    12% of N. Am revenues come from Gulf.

    65% of that is deepwater business, rest is shelf and transition zone work.

    The Gulf of Mexico margins are less volatile, comparable to U.S. land biz over last 3 years.

  43. 43
    zman Says:

    HAL

    They believe they are fully indemnified.

    But they have $600 mm in insurance and over $3 B in cash.

  44. 44
    jat Says:

    Re 39, maybe it’s a little less? Think most people assuming deepwater was a bigger percentage.

  45. 45
    AAA Says:

    I watched the press conference from louisiana this morning about the cap procedure. Sounded promising, but by now I’m deeply skeptical. Why didn’t they do something like this week one instead of fiddling around for a month? Why would this work when the dome didn’t? How do you actually get a cap onto a pipe gushing that amount of oil? Why can’t they use several pipes close to the leak to suck up at least some of the oil flowing out? Wouldn’t it be easier to suction the oil before it has had a chance to disperse?

    I suppose there are very good answers to all these questions, but nothing so far has exactly filled me with confidence. And why the delay in building berms? They mentioned they wanted to be sure they wouldn’t cause any environmental damage. How could any conceivable damage be worse than the oil?

  46. 46
    TEXWS6 Says:

    Re #45:

    If it doesn’t make sense, it’s probably due to the fact that BP is a foreign ran oil major oil company.

  47. 47
    zman Says:

    HAL

    Deepwater biz will be in hiatus for at least 6 months.

    Permit process will probably be slowed from the current 30 days to 90 days. Sounds likely from what I’ve read too.

    See some pricing pressure in the Shelf.

    Jat – I thought revenue wise it was a bigger slice of the Gulf …. makes me wonder if he took a trough level post 2008 to work off of.

  48. 48
    zman Says:

    AAA – have some thoughts on that, will get back to you after this CC.

  49. 49
    jat Says:

    He’s saying 65%.. tudor was thinking around this level, a bit above i think. GoM rig count has trended down over last few yrs.

  50. 50
    jat Says:

    by 49 I meant 65% of GoM deepwater, obv

  51. 51
    zman Says:

    Jat – I thought it was a bigger slice than that 65% number.

    Hard to believe they are opening this up to the phone lines.

  52. 52
    zman Says:

    … since there are members of the press and probably some shrimpers on this call.

  53. 53
    zman Says:

    HAL – talking about how proppants, bits, etc can move into U.S. land. Good thought I hadn’t had, helpful to the onshore land guys where that stuff has gotten tight in hot plays.

  54. 54
    zman Says:

    HAL

    Layoffs question: sounds like minimal as they can move people around to strong markets elsewhere.

    Comment on the cement job: No.

  55. 55
    zman Says:

    Still listening to this call, some nuggets but not a lot new here in my book. Good to hear that not all business in the deepwater is toast.

    Noting that yield names and refiners not following the market higher today, green but barely.

  56. 56
    zman Says:

    HAL – no instances of having lost work due to their involvement in the Macondo well.

  57. 57
    zman Says:

    Nice recovery in AEZ.

    Thanks for you ongoing chart work JB, will vote in a bit.

  58. 58
    TEXWS6 Says:

    Re #53:

    The amount of bits, proppant that are used offshore is pretty insignificant. They don’t frac much if any and the volumes of proppant if they do frac wouldn’t cover one stage of a Haynesville frac.

  59. 59
    bill Says:

    Perfect storm?

    Hi short interest in ng stocks
    hot weather driving demand
    supply yoy falls due to this demand
    short squeeze’s
    Am i calling for it..no.. im praying for it, lol

    should help all the usual names

    hk,chk,mcf,gmxr, even sd

  60. 60
    Dman Says:

    Z & BOP – is there any clarity on how the new rules will effect shallow water players like EXXI?

  61. 61
    zman Says:

    Bill – Heat, Hurricane, Squeeze all seem plausible in that order. Thinking DIG is an easy one on that. Or UNG even though that’s a weird one. Also the gasoline ETF if something hits the Gulf Coast.

    TEX – after I typed proppant, which is what he said, I thought to myself, self, that’s a video of an open flow from the gulf you have on your screen, that wasn’t even completed so your point is well taken. I would think tubulars wouldn’t work either as they’re much bigger in many cases, right?

  62. 62
    zman Says:

    Dman – the HAL guys are saying a lot of clarifications need to be made on the rules and that applies to deepwater only. I’d note that that big blowout at the Montara well in the link at the bottom of the post was actually in shallow water so I’d guess there will be some more rules. It sounds like a lot of red tape and delays, longer timelines, which sort of runs counter to the Admin’s drill it or lose it policy but everything is different now.

  63. 63
    Jerome Blank Says:

    #57, Zman, thank you…

  64. 64
    Dman Says:

    Z – I read somewhere that EXXI is shallow enough that the BOP is on the rig.

  65. 65
    zman Says:

    NG spiked up after CSU upped their hurricane forecast, now up 14 cents at 4.39. The 12 month strip is now $4.98.

    Dman – that is correct, I think the water depth there is 10 feet.

  66. 66
    zman Says:

    HAL – only 6% of total revenues is from Gulf of Mex. deepwater.

  67. 67
    zman Says:

    Good call with HAL, I continue to hold the $26s with the stock at 23.20 up 2.05 at the end of the call.

    HAL closing by reiterating things from the 1Q call, that international business remains strong and they are working hard to get this well plugged.

  68. 68
    TEXWS6 Says:

    Re #61:

    Correct on tubulars, the demand for offshore style (size) tubulars is mostly offshore. BUT, we are running more and more types of smaller, but offshore compatible tubulars in Haynesville/EFS due to the high frac pressures and corrosive flowing environment.

    Majority of tubulars ran onshors is either 4.5″ or 5.5″ LT&C casing for production, people run different surface and intermediate depending on the area.

  69. 69
    milepost_43 Says:

    BAD NEWS via CNN weatherman

    CNN reporting oil coming to FLA Panhandle… .. —

    Just showed map of High Pressure over central GOM for next several days will bring SW to NE clockwise winds pushing oil all the way to Apalachicola… .YIKES… … … ..

  70. 70
    milepost_43 Says:

    Forgot good news…..High Pressure means no hurricanes……

  71. 71
    zman Says:

    MP – yeah, its darn early for hurricanes although the Caribbean SST read like bath water.

    http://weather.myfoxtampabay.com/maps/WTVT/custom/temps_caribbean.html

    This time of year, if something is going to get started, it usually does so around Honduras and moves north, instead of the across the Atlantic track we see by August.

  72. 72
    BirdsofpreyRcool Says:

    Dman — the comment about EXXI’s BOPs being “high and dry” came from the EXXI CEO himself, last week at UBS.

    E21 is in one deepwater field (4600 ft of water or so, if i recall correctly) that is operated by NFX. Currently constitutes about 10% of E21 revenues. But don’t know if there were any plans to drill any significant wells in that field in the near term… and the Govt is not requiring the shutting in of existing deeper water fields already on line.

  73. 73
    zman Says:

    BOP – re NFX, nothing going on in dw for them but workovers.

  74. 74
    BirdsofpreyRcool Says:

    z — #73 thanks, I know. Guess my point was that I didn’t know if there was any capex associated with that field in E21’s budget that will be put “on hold.” But, according to Schiller, doesn’t really make much difference is there was…. E21’s plan is to shift all their capex to existing shallow water fields… an awful lot of those planned wells can be characterized as workover, recomplitions, extensions, etc. The kind of “lower risk” wells that are specifically NOT subject to a moritorium right now.

  75. 75
    BirdsofpreyRcool Says:

    The huge question for E21 (and MMR) is “what affect will all this have on permitting/drilling in the ultra-deep play?” Haven’t heard any clarification on that. Haven’t heard that it’s delayed either… other than the delay that everything is experiencing right now. Given that MMR is bouncing back today, someone is less worried about that today, than they were y’day.

  76. 76
    zman Says:

    re 73. Apologies, didn’t mean to state the obvious, just listened to NFX say it last week, as in “let’s talk about the Bakken, the Granite Wash, Marcellus, Malaysia and China but not the Gomex, not now”. They did get a permit two weeks ago for I believe a workover and HAL just confirmed that people will be allowed to do all sorts of things in the deepwater for the next six months to maintain production outside of drilling new exploration or development wells.

  77. 77
    Popeye Says:

    Saw stuck in the riser now.

  78. 78
    BirdsofpreyRcool Says:

    #76 — internet can be so flat, sometimes. I wasn’t dismissing your comment, just framing my concerns a little better. I always appreciate the help. Even “obvious” statements are usually worth repeating. Thanks!

  79. 79
    zman Says:

    BEXP struggling to top its 50 day moving average. Back above its 20 day and never got down to its 200. News there end of the month or early next.

  80. 80
    elduque Says:

    quick thoughts on KWK. Seems like the only major negative is high debt. Where is their oil play?

  81. 81
    AAA Says:

    Re 77, is there someplace that has a running commentary? Hard to understand what is going on at times.

  82. 82
    zman Says:

    Pop – yeah, watched it jam last night.

    Roger that BOP.

    Eld – they are a high liquids cut Barnett player so they get a lot of wet gas that gives them much better than you’d expect price for such a gassy company. They also have a acreage patch in the Montana Bakken up near NFX and ROSE but that’s probably 9 months from first spud.

  83. 83
    zman Says:

    AAA

    You can watch it here:

    http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/homepage/STAGING/local_assets/bp_homepage/html/rov_stream.html

    I have scrolling energy news which you can get on many trading systems and you’ll see headlines like “BP botches another attempt” go across every once in awhile.

  84. 84
    zman Says:

    The latest story I have from reuters is that they got stuck, are still stuck, will try to finish the last cut today and put a containment device over it tonight.

  85. 85
    dij Says:

    # 79. Similiar comments apply to EOG, sitting just under the 20 and 50 sma.

  86. 86
    zman Says:

    How am I doing? We want feedback.

    Right now the ZLT is off about 15% from its April highs. The ZIM fared much more poorly and the ZCAT remains in cash as there just aren’t a lot of catalysts around for the very near term and waiting around in this market in options is less fun than I like to have.

  87. 87
    zman Says:

    If you want to send feedback off the site you can send it to zmanalpha@gmail.com.

  88. 88
    zman Says:

    HAL holding up well post call. Could see some “they’re completely indemnified and way to cheap for the exposure they have” calls there tomorrow by the Street.

  89. 89
    Hoss Says:

    Z,

    Hope I’m not breaking any rules

    AAA

    May 31 BP Technical Update
    http://www.deepwaterhorizonresponse.com/go/doc/2931/581687/

    and…

    Secretary Salazar’s May 28 order:
    http://www.doi.gov/news/pressreleases/loader.cfm?csModule=security/getfile&PageID=33715

    Moratorium Notice to Lesees and Operators (Moratorium NTL)
    http://www.doi.gov/news/pressreleases/loader.cfm?csModule=security/getfile&PageID=33716

    table of effected deepwater drilling activities
    http://www.doi.gov/news/pressreleases/loader.cfm?csModule=security/getfile&PageID=33717

  90. 90
    Hoss Says:

    Z,

    86 – More Cowbell!

  91. 91
    1520sbroad Says:

    86 – go get coffee every day

  92. 92
    zman Says:

    OK, so less of Z around. Hmmm.

  93. 93
    1520sbroad Says:

    My theory (backtested exactly 4 hours) is more coffee + Z = green

  94. 94
    BirdsofpreyRcool Says:

    Did someone post this already? 13 minutes…. but great overview of what BP is planning on doing. Video was shot on Monday, but explains what is going on now.

    http://bp.concerts.com/gom/kentwellstechupdatelong053110.htm

  95. 95
    BirdsofpreyRcool Says:

    oops… looks like Hoss got the jump on me… different title, but already included in #89 above.

  96. 96
    zman Says:

    It’s a very good piece.

  97. 97
    zman Says:

    Words he would like to eat:

    http://www.realclearpolitics.com/video/2010/04/29/flashback_obama_says_oil_rigs_today_dont_generally_cause_spills.html

  98. 98
    zman Says:

    Thanks Guru for the suggestions, very much appreciated.

  99. 99
    elduque Says:

    re how are you doing? The site is invaluable. Where else can I get the answer on about 75 stocks in about two minutes.

    I am not looking for your trades to put mine on. However, your comment on AEZ the other morning was extremely profitable.

    Thank you.

  100. 100
    zman Says:

    Thanks Eld. Speaking of AEZ, was just looking at JB’s charts, can I get your latest thoughts there JB, that one does have some approaching catalysts, not that I would play with options but it seems to be trying to move on up. Voted.

  101. 101
    zman Says:

    Eld – anything you’d like to see more of?

  102. 102
    Jerome Blank Says:

    Re: #100 AEZ looks really good…trading at the upper end of daily channel line and moving avg resistance, would like to see AEZ get back above the 50 day at $6.75, I’m staying long…

  103. 103
    zman Says:

    Thanks JB, me too.

    I’ll have a revised Cat list out in the morning.

  104. 104
    elduque Says:

    re 101

    You can tell me everyday when a stock is going to move 10%, oh and by the way which direction.

  105. 105
    zman Says:

    Ah … mahalo.

  106. 106
    AAA Says:

    Re 89, very interesting and informative. Thanks.

    I have to say though, I have the same reaction I did to the presser this morning. Everyone is going around patting each other on the back for what a great job they’re doing, etc but the damn well has been spewing oil for 40 days. I guess I would like to see less button down corporate spokespeople and well-spoken government scientists and more butt kicking. When the BP guy was talking about how difficult it all was, my reaction was why didn’t you think about that before you lost control of the well? Or drilled it?

    Frankly, I’m sick and tired of all the understanding and reasonableness. It’s the same mindset that takes 8 years to put up a few miles of fence on the mexican border, when we built the Hoover dam in four yearts. I want some mean SOB with a cigar between his teeth to get in there and start kicking ass and taking names. Start firing people from the top down, give them a deadline to get it stopped and let someone else take over if they can’t meet it.

  107. 107
    zman Says:

    Forgot to answer earlier but I believe the reason they did not try the current method first is that they have to cut that pipe which will increase the flow of oil and they could, during the process, damage the BOP (more oil). So they went from low risk to higher risk. Obviously their overall plan for a 250Kbopd spill is insufficient for this much smaller spill and that’s real problem that will have to be addressed before they reopen the deepwater and honestly parts of the shelf (which goes out to down 1,000 ft) but which hasn’t been closed yet.

    Market looking hinky again, S&P trading very spottily.

  108. 108
    elduque Says:

    early thoughts on NG vs consensus?

  109. 109
    zman Says:

    Duke – working through it now, consensus was 91 this morning. I think I’m a few Bcf light to that. It was really hot last week compared to norms and imports were only up a touch.

  110. 110
    AAA Says:

    Z, they had a plan for a 250k bopd spill? What was it? Take a one way flight to Brazil?

  111. 111
    zman Says:

    AAA – no Brazil has extradition. I think maybe Iran. Seriously, I don’t know what made them think they could handle a spill like that but I think, from listening to the early testimony, the thought was the the riser would at least have separated properly. So the spill would not have lasted long. Since no one drills a 250,000 bopd single well, the plan must have been addressing the loss of a production platform, not a rig. So no BOP on the ocean floor, but a series of subsea well heads.

  112. 112
    zman Says:

    and since no one makes single well completions that large and no one has ever had a spill at that rate before, someone maybe at MMS should have asked if they slipped an extra “0” in there.

  113. 113
    zman Says:

    Diesel demand – have a call in with my transportation guy. I just checked the Landstarbroker.com website and number is way up to usual (shows number of loads on the road). Over the winter the number was around 2,200 pretty consistently, now 6,570, anyway, food for thought regarding the recent bump in distillates demand.

    On summer gasoline, AAA is looking a nice 5%+ bump in travel.

  114. 114
    zman Says:

    Wow = S&P

  115. 115
    Wyoming Says:

    AAA, I’m kind of half cocked on this but I thought this deserved some comment. We have done similar recoveries before in Kuwait, just not with ROV’s and at 5,000 feet of water depth.

    Why they prioritized the solutions the way they did will never truly be known. Perhaps it is from the government direction? I thought the dome was a pretty good 1st choice as it was pretty simple and is being used in other places. When I was in California, there were some natural seeps with the same concept design, unfortunately much shallower. The first dome did not work because at the depth attempted, the temps are very cold and gas combined with water formed hydrates. I have always been curious about any methanol or heating lines that accompanied the dome? I will assume they had something or the volume was just too much to overcome the hydrating issue.

    The slip on design they are attempting is much more difficult in my opinion then anything before. They have to cut out the junk from above (riser, parts of BOP ?, some drill pipe?) not sure all that is in the way. They will then have to get a good sealing area. Later, they will try to get some type of a sealing device (for the tube) over the flowing oil/gas. From there, they will have to get the device to latch or at least hang on to the stub. After all that , they will have to have a robust seal on the jagged edge they cut. When I looked at designs after a rough cut on a tubing patch design, not only is the radial patch a concern but so is the amount of the diameter that may be flared outwards. To have too large of a diameter device will require a larger amount of rubber to seal which will mean that it can not withstand a higher differential pressure across the seal.

    The key piece of engineering is that force=pressure times area (F=P x A). If I am not incorrect, I believe the riser was 22 inches in diameter. So I don’t think the device will have a closing feature. Just a means to attach the connection to the new riser they plan to put in place. It is not a cap.

    I am not sure about the comments about causing environmental damage but I can imagine the new stress the BP team is under knowing that there may be civil or criminal repercussions would make me pretty leery of having a SWAT team knock down my door in the middle of the night. I was told in my Hazardous Material training that is exactly what will happen in the arrest process, they will start low in the totem pole and ask “who instructed you” until they get to the person who says “I gave the order”. I will leave this section here as anything further will get me on a soap box.

  116. 116
    Gtinvest Says:

    Cramer just mentioned that Obama talked today about tapping domestic NG to meet our energy needs today in a speech in Penn.

  117. 117
    zman Says:

    Wyoming – one question. They are sawing off the last bit of riser after nipping it off with the 46 ton pinchers yesterday. Wondering why they don’t just unbolt that from the flange. Then why not lower the cap on that matches the bolts and rebolt it? Surely the answer is that the pressure would prevent that? Right?

  118. 118
    zman Says:

    Thanks GT, that beats “green energy” any day. Now let’s hear him make the two synonymous.

  119. 119
    Popeye Says:

    116 is the best news I have heard today.

  120. 120
    zman Says:

    Probably go time at CLNE and WPRT. Maybe also CUM as they make some of the natural gas fired truck engines. CLNE has been beaten down pretty sharply.

  121. 121
    Gtinvest Says:

    z at least it is same sentence with nuclear about half way down.

    http://content.usatoday.com/communities/theoval/post/2010/06/obama-economy-energy-oil-spill-pittsburgh/1

  122. 122
    zman Says:

    Oops, ticker change, CUM = CMI now

  123. 123
    Gtinvest Says:

    Anyone who is intersted should listen to wprt cc from last night. Very strong inidcations from china, india on ng. Canada developing lng fueling network for 401 corridor between detroit and quebec.

  124. 124
    Wyoming Says:

    There is actually a steel ring that is between the API flanges we use.It is what causes the seal and is a mother to nip tight when they leak on a test. I am not sure about the subsea connections. Also the bolts and nuts used to connect the flanges are pretty big and I am not sure if 46 tons would be able to be delivered in a scissor that small to fit in the small gap between the flanges. This is one of those areas where I don’t know what they have so my comments are purely speculative.

  125. 125
    AAA Says:

    Wyoming,

    Thanks, I don’t mean to be attacking their people. I just find this trial and error process a little hard to understand. I mean, how can it be a big surprise that hydrates would form in the dome? Don’t they model these things in advance? The whole process has shaken my confidence in the industry. don’t think there won’t be repurcussions on shore as well. Who will believe the drillers now when they say there is no riusk of groundwater contamination from fraccing?

  126. 126
    zman Says:

    Wyoming – so ROVs with big crescent wrenches couldn’t just unbolt it? I actual saw one unbolt something else the other day. Say you pinch the top to hold it in place in the oil flow and then take all the bolts out. Then reverse the process to put the cap on.

  127. 127
    PackMan Says:

    Obama at 2:40 saying jobs report will be good.

    give him a script and he’ll say anything his handlers tell him.

    need to juice the markets for the next drop.

  128. 128
    Wyoming Says:

    125, I said the exact same thing to my wife this morning over breakfast. The one nice thing about working 28/28.

    Your answer is correct to me. We are screwed.

  129. 129
    zman Says:

    HK – coming off the bench like a champ but trailing RRC, SWN, UPL by a wide gap on the day’s moves. That should change soon.

  130. 130
    Wyoming Says:

    Z, I only know the big points of subsea as it was part of my Well Control Training. I don’t know the details of executing the work. What kind of torque an ROV can deliver etc..

  131. 131
    milepost_43 Says:

    120….out earlier today…missed WPRT below 14….AAAHHHGGG again…..

  132. 132
    zman Says:

    Thanks Wyo, just wondering, it’s not like they’re going to listen to me anyway. Just wondered why, if it were possible, you wouldn’t bolt the cap to the top of the BOP.

    Stocks on fire for a change.

    AEZ moving towards your range JB.
    HK catching up quickly.

  133. 133
    BirdsofpreyRcool Says:

    z — from the BP video skematic, it wasn’t clear to me that bolting was part of the process. More like jamming a cap on, it looks like… but, to my non-engineering eye…

  134. 134
    BirdsofpreyRcool Says:

    HeadTrader said BHO made comments in his Carnegie Mellon speech about expecting the jobs number to be good on friday.

    Thing is, how would he know?

  135. 135
    zman Says:

    BOP – yeah, definitely jamming it on with a some kind of gasket. Just wondering if you could bolt the sucker down or if the oil pressure coming out would make that impossible. John Wayne would have done it but would have gotten a mouth full of oil in the process.

  136. 136
    BirdsofpreyRcool Says:

    Unless they are counting jobs the way they “hired” census workers… like, one person was hired and laid off 8 times… but “counted” as 8 jobs created. hmmmmmmmmmmm….

  137. 137
    zman Says:

    The President is supposed to get a 1 day headsup on the payroll numbers. I guess he got two or he was speaking about the claims number.

  138. 138
    AAA Says:

    Just looked at one of the feeds and it appears they cut the riser off at the BOP. Thing is gushing oil like no tomorrow.

  139. 139
    zman Says:

    AAA – it’s partially off, looks like they may be taking the saw to the surface for repairs, hard to tell, wish this thing had audio. It does make one heck of an ad for OII as someone said the other day. No wonder OII makes ROVs and spacesuits.

  140. 140
    Geno Says:

    re 126 you take all the bolts but one off then swing it around through the flow, then you put new valve with tact weld ring on it in place with one bolt swing it through the flow and put rest of the bolts

  141. 141
    BirdsofpreyRcool Says:

    Geno — thank you for the visual explanation. Makes sense!

  142. 142
    AAA Says:

    Z, re 139, yes, someone is missing a big opportunity to put upa site with a running play by play commentary. The feed probably has more people watching it than MSNBC is drawing.

  143. 143
    zman Says:

    Geno – nice!

    AAA – or at least the music from 2001, a space odyssey.

  144. 144
    zman Says:

    Nicky – curious your thoughts re inverted H&S. Good continued string of daily calls on your part.

  145. 145
    Nicky Says:

    Resistance is at 1096 – 1100. This rally is coming on a contraction in volume which isn’t a great technical sign. Cycles say this rally should last into 7 – 9th June. The voodoo next week is VERY bullish. So now just to work out the short term! Tomorrow looks down. Before I decide on Friday I want to see what the pullback looks like tomorrow. But my feeling is that tomorrow may complete a triangle for wave e of B – say back down to 1075 – 80 – and then we literally explode higher in wave C….and yes there is an inverted h and s setting up as well….

  146. 146
    zman Says:

    Thank you very much!

  147. 147
    BirdsofpreyRcool Says:

    from Jim Cramer’s column (curtesy of HT)
    —————————————-

    The president blinked! He shifted. Those of us who follow his every word on energy know that he put natural gas in the same breath as nuclear power. He made it clear that it is now considered a clean fuel. He made it clear that he is going to work to pass the Senate bill that has tremendous incentives for natural gas trucks.

    He did it.

    He has NEVER put natural gas in the same camp as nukes. He has never talked about “tapping our natural gas reserves.”

    The fact that he gave this speech in Marcellus Shale territory should not be lost on us either. The group’s on fire here, led by Southwestern (SWN) , which is Barnett, but also National Fuel Gas (NFG) , Range Resources (RRC) , Atlas (ATLS) , EQT (EQT) and Devon (DVN) , all domestic heavy nat gas plays.

    I think this might be the beginning. It might be the beginning of the recognition that we have no choice, post-BP (BP) , but to turn to natural gas. We have too much of it and it is too easy to get out of ground with too little damage compared to every other form of energy.

    Do not think that this was done idly. The president has repeatedly chosen to ignore this fuel.

    That’s no longer the case.

  148. 148
    zman Says:

    um, JC, SWN is Fayetteveville, not B.S., but why quibble. Good stuff.

  149. 149
    zman Says:

    Closing on the HODs. Beerthirty.

  150. 150
    BirdsofpreyRcool Says:

    (Jim doesn’t let details get in the way… )

  151. 151
    elijahwc Says:

    LINE Linn Energy announces Results of First Operated Horizontal Granite Wash Well, With an Initial Production Rate of 19.4 MMcfe Per Day..per briefing.com

  152. 152
    zman Says:

    Off topic: Does anyone have any recent research they can forward on T?

  153. 153
    TEXWS6 Says:

    T?

  154. 154
    zman Says:

    Yeah, the wireless company.

  155. 155
    mimster90 Says:

    Good news for E21

    Feds approve new Gulf oil well off La.

    By MIKE BAKER, Associated Press Writers Mike Baker, Associated Press Writers – Wed Jun 2, 4:34 pm ET
    Federal regulators approved Wednesday the first new Gulf of Mexico oil well since President Barack Obama lifted a brief ban on drilling in shallow water, even while deepwater projects remain frozen after the massive BP spill.

    The Minerals Management Service granted a new drilling permit sought by Bandon Oil and Gas for a site about 50 miles off the coast of Louisiana and 115 feet below the ocean’s surface. It’s south of Rockefeller State Wildlife Refuge and Game Preserve, far to the west of the Deepwater Horizon oil rig that triggered the BP spill.

    Obama last week extended a moratorium on wells in deep water like the BP one that blew out a mile below the surface in April and is gushing millions of gallons of oil. But at the same time, the president quietly allowed a three-week-old ban on drilling in shallow water to expire.

    “I’m outraged,” said Kieran Suckling, executive director for the Tucson, Ariz.-based Center for Biological Diversity. “How is it that shallow water drilling suddenly became safe again?”

    Bandon Oil and Gas first sought the permit in April shortly after the Deepwater Horizon exploded and sank. The permit was approved Wednesday morning, according to MMS records.

    Suckling said the administration was misleading the public by quietly resuming work in shallow waters while acting as if it was taking a tough look at deepwater work.

    Interior Secretary Ken Salazar said in a news release Sunday that the extended moratorium on deepwater drilling was needed to provide time to implement new safety requirements.

    “With the BP oil spill still growing in the Gulf, and investigations and reviews still under way, a six-month pause in drilling is needed, appropriate, and prudent,” Salazar said. He said the term “deepwater” referred to drilling at depths of 500 feet or greater.

    Frank Quimby, a spokesman for the Department of the Interior, said officials were comfortable with a variety of interim safety measures for shallow drilling, such as re-certification to ensure that blowout preventers will work properly. Officials plan to soon distribute a formal note to companies that outlines all the required actions.

    “The interim safety measures, as long as they’re completely adhered to, we feel that’s enough for the shallow-water drilling to proceed under closer scrutiny and stepped-up inspections,” Quimby said.

  156. 156
    krishna Says:

    test

  157. 157
    zman Says:

    Hello krishna

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