Tuesday – S.S.D.D.

Posted on by zman

 

 

Market Sentiment Watch: More of the same with Fitch warning over the state of the U.K.'s finances. Somewhat bored with the lack of news flow from energy names but content to wait it out and in the meantime play only company specific news or big downward shocks in the market for bounces. WLL's positive results were good for about a half a day of upside in the stock before being discounted to a loss by the close. The EOG situation becomes more interesting by the day (see below). Otherwise, energyland is as boring as usual for June. While RBC's panel conference is interesting, most of the commentary is technical/efficiency oriented and not the stuff that gets investors in a nervous market off the sidelines. Over the next week, three more conferences should provide additional opportunities for more catalyst driven stock trading.  No ecodata scheduled for release today but Ben Bernanke did say at dinner last night that he doesn't expect a double dip (did he expect the first one?) and that his "best guess was that we'll see a continued recovery ... it won't feel terrific" ... no kidding on that last part.


 

In Today’s Post:

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

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):

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

      • Not yet but getting closer.

 

  • ZIM (Zman Inefficient Markets portfolio)
    • $6,500
    • 12% Cash
    • Yesterday’s Trades:
      • None


Commodity Watch

Crude oil eased $0.07 to close at $71.44 in volatile trading yesterday.  This morning crude is trading flat.

  • Norway Watch: Norway freezes drilling in new deepwater blocks pending the outcome of the Deepwater Horizon investigation. 
  • OPEC Watch: Iraq complaining about lax quota maintenance. Easy for them since they are not yet under quota restrictions but they have a good point. OPEC should revise it's demand figures again next week (my guess is slightly lower) and with oil prices teetering just above the $70 mark you have to think that a second month of lowered demand forecasts would cause Saudi to start cracking the quota discipline whip.
  • Early Read On Inventories:
    • Crude - DOWN 1.0 mm barrels
    • Gasoline - FLAT
    • Distillates - UP 1.0 mm barrels (it looks like we get a smaller build than this to me)


Natural gas rose $0.12 to close at $4.92 yesterday, and now looks like this, probably a bit extended. This morning gas is trading up slightly.

  • Political Sword of Damacles Watch:  Pennsylvania declares moratorium on all EOG drilling in the state following a blowout last Friday.  Silly. Accidents happen. In fact, they happen all the time.  
  • Imports Watch:  (data for week ended June 3). Tame.  In total down 0.6 Bcfgpd from last week, up 0.3 Bcfgpd from year ago levels.

    • LNG: 1.2 Bcfgpd, in line with the prior week. So far no hint that higher prices have brought more cargoes to the U.S. but that's not unexpected as prices have only been off the lows for a couple of weeks now. We'll monitor as always but I'd expect a rise if prices hover near $5 for long.
    • Canada: 6.5 Bcfgpd, down 0.6 Bcfgpd from last week.
  • Tropics Watch: Nothing yet.

Crack Spread Update 

 

Nothing to add to last week's comments other than cracks continue to hang in there setting up a decent 2Q reporting season but right now, given market conditions, the stocks are behaving as if they don't care.

Stuff We Care About Today

Why I Own, What I Own (Options Only Edition)

BEXP - I own calls in the ZIM, ZCAT, and the common in the ZLT

  • Bakken player with high growth potential and a string of catalysts in the form of well announcements, generally every 3 weeks.
  • 1 major catalyst around the end of June in the form of their first Bakken test in Roosevelt county, Montana, the Rogney 17-8 well.
  • They have 83,000 net acres here and if Bakken and Three Forks work here it could a third Bakken core area for them, significantly upping potential reserves.
  • EOG has completed their Carat well about 12 miles to the northeast and it is rumored by the local press to be a 1,000+ boepd completion.
  • BEXP's presentations have begun to include a section on the eastern Montana Bakken over the last several weeks and I suspect they have enough data in hand (the well has been listed as completing for many weeks now) to have played this down more if it were not going to be a crowd pleaser.
  • Valuation: Cheap for it. BEXP has traded at a premium to its oily Bakken peers and to the E&P group as a whole since it began drilling standoutish IP results in the play. At present, the company is cheaper than I recall it being over the last two years, even as the drilling results continue to improve and it's 2010 and 2011 production volume growth  targets look more certain.

BP - I own calls in the ZIM

  • Theory is that the woodshedding to date has been overdone.  BP's share price is off 39% or $73 B of market cap since the Deepwater Horizon sank. 
  • So far no significant bounces have come as plan after plan failed to stem the flow of oil from the well.
  • The "cap" seems to be working better than anything they've tried to date but public and political outcry is causing investors to shy away from the name and brokerage firms to downgrade it (we saw two of those yesterday) due to the rising cleanup and capping costs and the potential for litigation into the next century.
  • My sense is that further progress in stemming the flow puts the company on a more proactive and less reactive footing.

HAL - I own calls in the ZIM

  • Dragged down with BP.
  • Company claims full indemnification.
  • Exposure to U.S. deep water is small.
  • Meanwhile, North American business has remained resilient and international business continues to improve.
  • Valuation: This simply feels overdone and the name now trades at a higher than normal discount to its peers, especially SLB.

HK - I own calls in the ZIM (since the Analyst meeting) and common in the ZLT

  • Gassy, growthy, deleveraging, meeting monetization and growth targets as promised.
  • With natural gas having rallied in the last couple of weeks the name is starting to sit up and take notice.
  • I continue to think that onshore gas and oil will see increased interest as the future costs and time line of offshore drilling remain in flux.

EOG Gets "BP'd" - PA Calls Halt to All EOG Marcellus Drilling in the State:

  • Impact: Minimal on operations.

    • 11 MMcfgpd of current production from the Marcellus or < 1% of total
    • Suspension expected to last "up to " 14 days for fracs and 30 days for post drilling clean out.
    • EOG has 4 rigs affected by the suspension, two smaller spudder rigs and two rigs that drill the horizontals. Note that they are only suspending drilling for 7 days and thus can drill wells and complete them later.
  • Guidance: NO IMPACT to previously stated 13% growth guidance
  • Nutshell: I’ll be looking at how hard the market hits EOG over this. Down 6% on Friday, down 2% more yesterday so far.


Odds & Ends

Analyst Watch:

  • Goldman cuts Oil Service sector from Attractive to Neutral.
  • FBR Cuts:

    • BHI to Market Perform - target falls from $61 to $47
    • NE to Market Perform - target falls from $62 to $36
    • DO to Market Underperform - target drops from $97 to $54
    • They also cut price targets on essentially all covered OIH names.
  • XCO started at Buy at Morgan Keegan.
  • OII - upgraded to Buy at Prichard following OII's reduction up guidance yesterday.

     

Interesting Reading Watch

 

123 thoughts on “Tuesday – S.S.D.D.”

  1. Good morning. I’ll be out most of the rest of this week…. going somewhere where internet connectivity is a bit of a problem. So will check in when I can.

    Meanwhile, a teensy bit of improvement in TED’s attitude this a.m. Teensy. We’ll see if it holds (it didn’t, yday). On the other hand, credit indices not very perky. Sorta trading on either side of neutral… with a bias to weak. Credit Bears are out in force… they want to send the market running so they can cover their short bets. The Fight is on.

    IG +3/8bps wider right now

    HY +1/8pt higher (stale quote)

    TED +42.2 bps… a long way from +25.

    Reply

  2. BOP thanks and you will be missed. I’m planning to do the same the week of July 4th as that has proven in the past to be the slowest week of the year.

    By the way, your comments on TED vs the S&P yesterday kept me from entering a new position just before that end of day swoon so thanks for that as well.

    Reply

  5. BP getting slammed over #3, down another 4%. Expecting update in 20 minutes. At last check they were collecting about 15,000 bopd.

    Reply

  7. Re: #4 BP…another gap down this morning, referring to the P&F chart the bearish price objective is right below at $34 which corresponds with a zone of longer term support… there’s just so much emotion in this stock right now, let’s see how the stock reacts intraday at $34 which looks more likely…

    Reply

  8. Thanks Eld. Thought this mike was turned off. It turns out we’re just in summer mode. Very quiet. S&P looks like it wants to die.

    Reply

  9. JB – thanks, am just watching it fall and thinking to play for big spikes down as per post. I also like it for Friday to Monday plays as I don’t think the current action will deter a takeover if it gets cheap enough.

    Reply

  10. BEXP slipping below the 100 day SMA with the general mkt…would like to see this at or above the 100 day on a closing basis…

    Reply

  13. UNG continues to be an intersting story…UNG is trading at a price zone that has been a habitual problem…would really like to see UNG reverse back into X’s with the $8.50 print and then base on the 100 day SMA/longterm trendline, this could set up a flag consolidation for the next leg higher, a convincing break back down probably means another down cycle, perhaps with a higher low…

    Reply

  14. Z – SPX may be dead but plenty of craziness in energy & metals. Gold has hit new all time highs today in $US. I guess it could back away again but it is trading very “dry”, i.e. not taking much of a hit when the market tanks.

    Reply

  16. UNG price performance lagging futures slightly, but overall fairly stable…check out the relative strength chart…UNG:$NATGAS

    Reply

  17. Thanks much JB…waiting on BP to weaken further.

    EOG trying to fight higher.

    EXXI – move attributable to offshore shallow water rules due out today allowing drilling to resume within about 30 days. See MMR, SGY. Should also be good for names like ESV, RDC. Actually RIG has a lot of jackups in their fleet but not going near that now.

    Reply

  18. NG off a dime… seems extended, not surprised to see a pullback. Should get a nice number this week though on heat and slightly lower imports.

    Reply

  21. BP watch:

    14,800 barrels collected and 30.6 MMcfgpd flared over the last 24 hours.

    Flow looks smaller on spill cam.

    BP down another 5.4% now on “Kick Ass” comment.

    Reply

  26. Re: #23 Zman, thank you, HAL is at an interesting spot, trading right above long Term P&F trendline support at $21, a reversal candle at or above $21, could be the higher low to try a long…

    Reply

  27. Thanks. BEXP working on a gap fill at the moment. Should have two bits of news next 3 weeks. Maybe one later this week or next, the other around month end. The first not so big although strong results firm the production profile. The second would be game changer if positive.

    Reply

  28. Morning all. BOP I am going to miss your updates….
    I am noticing that energy is outperforming the broader market the last two days – maybe the start of something or is that wishful thinking.

    1041 is perilously close.
    This move looks like an ending diagonal in which case it can stop anywhere here (maybe down to 1044) and the more bullish counts remain in effect.

    Under any of the counts (except for the very bearish count) and that includes a bearish count I expect to see a bounce very soon.

    The Russell made a new low this morning, the SPX did not and the RSI is showing signs of divergence so unless it makes a lower low the SPX may stage a rally.

    We have support here at the 1050 area, then 1044…If the bearish count plays out then the low should come between 1010 and 1030.

    The super bearish count has us collapsing – I don’t see it – it should be stronger right now if that was happening and this looks far more like a leading diagonal or an ending diagonal.

    Reply

  32. SPX gap up to 910 on 15 July 2009 has not been filled.

    BEXP has a more recent gap that is weighing it down.

    Reply

  36. the voodoo does not get out of the danger zone until 11.41 est.

    The sentiment is so negative i feel like the Dow is down about 200 not 22!

    It feels like we are trying to form a base.

    Reply

  38. WILDZTRADE – ZCAT – BP

    Added (30) BP $38 June Calls for $0.50 with the stock at 34.55, down 6% on the President’s comments. See site for details but capping efforts continue to progress and I think it is time for me to bottom fish here. I see the catalyst for this trade as continuing improvement in oil recovery. As of this morning’s update, BP was capturing over 15,000 BOEpd from the well.

    Reply

  42. 39

    BP (just did it)
    BEXP (watching the gap and hoping it fills before they pump out another 2 to 4 wells in a press release)

    HAL – oh so cheap, EPS not getting hit anywhere near as hard as the stock.

    Honestly, there are a lot of names that
    fall into the category given where commodity prices are. $70 is a good price for oil in this market environment. People act like a fall from $80 to $70 means a lot but really, it doesn’t since most analysts were below the strip for estimates. It’s more than in the stock valuations at this point. But this is a market driven by sentiment. Bad sentiment. Negative, kick a small animal sentiment. And it’s hard to fight the European onslaught of really bad news at the moment so my thought it that I continue to Buy stocks and trade options and concentrate on not getting hurt and not being complacent.

    Reply

  43. Re: #41, bp 5 min chart added, as can be seen on the 5 min, buyers are trying above the $34 level…BP attempting to find an intraday bottom..would like to see a higher low reversal candle above the previous low at $34.15…but mkt not helping out at the moment..

    Reply

  45. Good volume coming into BP on this little rally.

    SP jumping up. Not sure if that’s due to the small biz survey just out seeing an improvement in the economy or something else or just noise.

    Reply

  46. Miss a shot at EOG, see post, earlier for being a dime too cheap. That’s also in the enough is enough camp. Those kind of stocks, which outperform on weak days like this, often get a big rally with a small one in the market. Today, it was up $0.70 when I missed it at the market low. Now up $4. Very volatile out there.

    Reply

  50. Crude back up to $72.30 on this move up in the S&P. This is an odd looking move, very broken chartish (gappy).

    BP confirming it will pay its quarterly dividend.

    Reply

  51. “BP is buying keywords on Google and Yahoo for things like “Oil Spill” to help spin some damage control. I guess if you can’t plug your spill, the least you can do is try to clog the flow of information.”

    Reply

  52. Z – re #49 – we are getting a decent bounce off the lows. Now to see how far it goes.

    Reply

  53. EIA Monthly short term energy outlook out

    EIA seeing higher growth than before for natural gas. Now up 2.1% this year, was 1.3%.

    But it also sees consumption up 3.8% vs a prior 3.0%.

    On oil, they see non-OPEC oil production rising 500,000 bopd, was up 660,000 bopd so a pretty good chop.

    Reply

  54. Popeye – yeah, but its not like their PR team could do anything about the spill. It lets them feel like they’re part of the team. I personally don’t get people faulting them for trying to protect their brand. If the brand dies and we all boycott the stations then they have no money to pay all the lawsuits. If they don’t pay dividends, the stock falls more restricting their ability to raise capital. I have not heard what they are doing on the buyback front but they have had a long standing repurchase program in place and I would guess it is cranking at this level.

    Reply

  57. Just passing !@#$ along Z. I’m more worried about untimely NG accidents affects on my portfolio.

    Reply

  58. Eld – Patiently watching. Note cracks in general continue to improve. Estimates for the quarter appear very “makeable” as do the 3Q numbers. I may take a little if we see demand for gasoline take a significant uptick tomorrow but so far, it’s in the camp of the market just doesn’t care. Sort of interested in FTO, SUN, TSO as well. Those Pac NW cracks are very strong and I’d guess that’s why Howard Weil upped TSO this morning … and still no one cares.

    Reply

  59. I just bt some vlo. Corn cheap- ethanol is here to stay, for now, and they bt a lot of cheap ethanol plants. Is there anything wrong with the logic.

    Reply

  60. Popeye – I know and keep it flowing, I like to hear it all, bad or good. By the way I think these onshore blowout fears are vastly over rated in terms of importance (excepting those affected directly by the Chief accident in W. Va.). It is a dangerous business and accidents are pretty common. This is only getting press because we’ve had a number of accidents in the mining and drilling space this year. If anything, it means higher prices for gas.

    Reply

  61. Eld – no, I don’t think so. Last conference call they mentioned getting bigger in ethanol and are pretty proud of their cents on the dollar buys in that space. Long term I have a problem with the domestic refining industry as I think any form of cap and trade passed is likely to be more onerous to them than it will be on imported finished products. And there is a lot of finished product capacity coming on the market, especially from the middle east in the near term. So far we have not seen a big uptick in those imports but I think it could happen in 2011/12.

    Reply

  63. Z – when there is a cluster%$*# of this magnitude, the PR dudes need to realize that no amount of spin will do anything for the brand. Especially not when the CEO goes around making moronic comments. The only thing that will help is a lot of “mea culpas” and spending huge amounts of money to fix what can be fixed. But the lawyers will say you can’t do the mea cuplpas because then the lawsuits will go to infinity. So they have to choose between the brand and the money & might as well donate the PR people to their competitors. In fact they should donate their CEO to someone, but I can’t imagine any takers for that clown.

    Reply

  64. Eld- my long term thought should not preclude a trade for 20 or 30% on a move in summer demand. VLO is benefiting from an increase in diesel exports to Latin America and should benefit from a seasonal move in gasoline demand which is more noticeable than an abnormal slump in jet fuel. I do think they may not see the margins we’d normally expect given some premium pricing (smaller discount to WTI) of late for the heavier crudes they can use. This should limit the amount they beat by in 2Q but again, I think results are strong and they will be able to say more positive things on that call.

    Reply

  65. Dman – I’m not a BP apologist. I commonly referred to them earlier this decade as Broken Pipe and some less kind names. I just think this is overdone. Losing $5 B + additional market cap because the President wants to score some points and show that he’s tough, that he shaves every morning is a bit much for me to understand. How exactly is he going to “kick their ass?” Go all Chavez on them and nationalize their assets? Or come up with some other antic that will inhibit them from trying to deal with this situation? I’d rather see him say “What do you need to cope with this, we’ll bill you and you’ll pay it, but for now let worry about the issue at hand, stopping the flow”. I don’t know about you but I clam up and get defensive when people threaten me. I also get distracted. I’d rather the BP guys not be distracted.

    Reply

  68. Rat – continuing improvement in the recovery story. They are at capacity now for surface processing but are bringing the Q4000 over and will add that soon. It was already on site. So progress is level production and then an uptick to 20,000+.

    Geno – that’s my thinking, yeah. Told some folks on my block I bought some last week and you would have thought I’d thrown an oil covered bird at them by the look on their faces.

    Reply

  69. Tony Hayward invited to testify before House Energy and Commerce subcommittee on June 17.

    DO – S&P cuts to Hold.

    Reply

  70. Z – I was just addressing the PR issue. The fact that they are still using conventional PR methods (i.e. spin… if you say “black=white” a lot, people might believe you) shows that they simply don’t have a clue. The CEO exemplifies this to a bizarre degree.

    The share price, that’s another matter.

    Reply

  71. D – I hear ya, was just thinking out loud. Hopefully Hayward won’t tell congress “really, it’s a big ocean, and if you calculate the volume of oil, it is very small”. The wife says they should replace him in the commercials with Hugh Grant.

    Reply

  73. Z – btw, with all the talk of lawsuits, what happened to the cap on damages? I know that BO “told” them to ignore it, but what does that mean exactly?

    Btw #2 I agree that the O-man’s antics on this have been absurd. He’s not an angry guy, but pundits say he should get angry so he pretends to be angry. Wow, I’m so impressed. If they told him to put on scuba gear & put a cork in the thing himself … ??

    Reply

  74. Re cap on damages. Don’t know. Nothing that I know of. BP has spent about $1.3 B so far. I would not trust a comment about ignoring it either. The law needs to be changed and I assume that’s being worked on.

    Re Obama – I actually think there is little he can do other than support them and bill them. I think he was doing fine and that life shouldn’t stop while this goes on (so keep Golfing and hanging with the last real Beetle etc). But I do have a real issue with the moratorium. That is just arbitrary and not what his experts recommended. That get’s me back to plane, car, train crashes … all things that have not caused us to ban them. I’d hate to see what happens if we have a nuclear 3 mile island type issue during his presidency. That’s 20% of the U.S. power supply.

    Reply

  75. Thanks DrL. Hard to tell from the pictures if what the pilot is talking about is what he speculates that it is or not.

    Reply

  76. Re #74, I’m not an obama fan for sure, but I don’t think there was a realistic option to a deepwater moratorium. Consider that two of the industry’s biggest names suffered a blowout, meaning it can happen. Consider also that BP clearly had no clue how to cap it. The more they emphasize the difficulties of capping a deep well, the more they made the case for a moratorium. Then consider the horrific environmental damage that is inevitable.

    Now consider the position Obama et al would be in if they hadn’t imposed a drilling halt and there was another well blowout. Unlikely sure, but possible. No politician is going to take that risk.

    Reply

  77. AAA – It’s a tough situation to be sure but the odds of this happening again appear to be shockingly low. It’s done now so there’s no point in me belaboring it.

    Market still very choppy on the S&P.

    Reply

  82. Don’t know who follows shadowstats but here is one of the headlines:

    “5.9% M3 Annual Decline Deepest Since Early-1930s Banking Crisis”

    Reply

  83. 81…sent…like the way TGA is holding 7.5ish…1st horizon frac in Egypt news coming late Jun/early July

    Reply

  84. Got it, thanks. Agreed re action in the name. Interesting story. Give me the week and I’ll have a piece out on it.

    Reply

  87. This was announced today-it prob falls in the “what have you done for me lately” category-APC off 7% today, over 40% since BP spill-this could also be candidate for acquisition.

    http://www.oilandgasinvestor.com.

    Oil and Gas Investor Announces 2009 Excellence Awards Winners:

    among others:

    2009 Excellence Awards Winners

    Executive of the Year: James T. Hackett, Chairman, President & CEO, Anadarko Petroleum Corp.

    Last year this leading Houston-based company generated a 68% return to shareholders, while cutting costs and spending during the downturn. CEO Hackett has revised the asset portfolio through a series of acquisitions and divestitures to focus on high-margin, high-growth plays. Today, Anadarko holds prominent positions in Alaska, the Rockies, offshore West Africa, the Gulf of Mexico and in Mozambique, Brazil and Algeria. In 2009, it announced positions or joint ventures in the Haynesville, Eagle Ford and Marcellus shales and nine deepwater discoveries around the world.

    Reply

  88. Choices – makes sense. Hard to run the numbers though since we don’t know liability there either. They have a slug of debt and less ability to pay than BP if the costs get really big and they have 1/4 of this well. Hackett is the best I’ve met.

    Reply

  90. Z – would have to take out the earlier highs and then likely be putting in a c wave of iv with still another low out there. Its pretty miserable price action.

    Reply

  92. Was just listening to the technical review from BP this morning. One questioner asked why it looked like there may have been 2 pieces of drill pipe sticking out of the top of the riser section atop the BOP when they cut it. The BP guy did not indicate this wasn’t the case and said it did look like two pieces of drill pipe were in there (side by side). If that’s the case it explains why CAM’s BOP couldn’t shear them off and shut the well. Makes you wonder if they shouldn’t try pulling one out and re-engaging the shear rams.

    Reply

  94. … which probably explains why CAM is up today. Out of warranty, was not responsible for service and now, a plausible reason why it failed as it was not designed to shear two pieces of drill pipe.

    Reply

  96. “They” are just trying to make it not look like a breakout. Another double top? oh no?… sell sell sell.

    Reply

  98. VTZ – don’t know about gold but the rest of the market is very jumpy, has a thin feeling to it although volumes in many of our names are not light.

    Reply

  104. CAM running now. If there are two pieces of drillpipe side by side in the BOP I can’t see how they’d be liable for it not cutting them.

    Reply

  105. re 105 that might be drill pipe that has been flow cut and move up hole or casing. i still can’t believe the bop’s are still around. i had a blow out onshore and the flow destroyed the bop’s never found a trace of them.

    Reply

  106. Geno – Seems like a pretty rare event.

    S&P closing up 1.1% in really odd trading/very mixed market. Beerthirty.

    Reply

  107. V #102 so the sellers waited till after the close to hit it with volume. Now if they wanted a good price, you’d think they would sell during the session., Manipulation at work.

    Reply

  111. UNG…not to make something out of nothing, but this looks to be the first time since about July of 2008 that UNG closed at or above the 100 day SMA for three consecutive days…

    Reply

  112. ECA…breaking out of the topside daily channel, P&F buy signal, really looks good….check out the chart

    Reply

  113. EOG also looks really good right here, and EXXI is holding long term weekly trendline support and has an interesting consolidation triangle forming at the 200 day daily SMA support line…

    Reply

Please comment below

This site uses Akismet to reduce spam. Learn how your comment data is processed.

s2Member®