16
Jun

Wednesday – EIA Oil Inventory Preview, more WIOWIO

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Market Sentiment Watch: Technicals rule as the markets move back to flat on the year. In energy land, real news remains a scarcity outside of the BP spill and the President's speech last night was short on details and big on a push towards clean energy. I thought it was supposed to be about the effort to cap, contain, and clean up the spill. How naive of me (more on that below). In economic news, inflation remains more than tame once again pointing to no chance of a change out of the Fed. PPI today and CPI  tomorrow should be tame, giving the Fed an excuse to do nothing, which should provide support for equities as they provide the only real game in town at the moment aside from some commodities.

Nicky Watch:   I suspect that we re -test that 200 dma at the 1108 level but could happen overnight in the futures.  The astro points to another day of upside although not as strong as today.  Cycles too are into their target area for price and time - the short term cycles at any rate.  Due to the strength today I think it likely we go take a look at the 1119 - 1123 area and its possible we go as high as 1130.  I expect at least a short term top by no later than the eod tomorrow.

 

Obama Oval Office address was done in less than 20 minutes.

I did not hear much new. Key points:

1) BP Gulf Recovery Fund. President Obama will "direct" BP to set aside "whatever funds  are necessary" today when he meets with BP's Chairman (that's day 58, first meeting between the two for you people playing at home).  No size of the fund was quantified. but the whisper number is $20 B.  The president did borrow BP's phrase "legitimate claims" which I find interesting but I think BP is going to have to offer some resistance soon to the President's plan unless it wants to become an ATM for the U.S.. Not that I don't think they should pay what they owe but they've said they will repeatedly and at some point you must take a prudent approach that doesn't kill the Golden BP.

2) Big Oil Was Unprepared For The Size of the Spill.
The President won't get any argument whatsoever from me. The plans are "cookie cutter" copies of each other to borrow a line from Waxman, and are obviously insufficient if not downright bogus. Obama laid blame on MMS as well. Again, no argument here although I fail to understand how Interior Secretary Salazar sidesteps  blame as easily as a greased (oiled?) pig evades capture.  Obama expressed an interest in finding out what went wrong, correcting it, and getting back to drilling in a timely manner. I was not on board with the moratorium in the first place given the safety track record to date and the multitude of failures that had to all occur to make this event happen but I take some small relief from the idea that we may see a restart before the end of 6 months. He said he understands the hardship this moratorium causes on the people in the drilling industry in the region. I doubt that very much.

3) Big Oil Bashing. He did a little BP bashing and Big Oil bashing for not spending more on alternative clean energy R&D comparing it to the tech sector who spends way more as a percentage of revenues.  Honestly the tone was a little gentler than I expected. I would point out that the difference between  the two industries should be obvious to everyone (except I guess the president). If not then I would point out that tech companies must invest in R&D to come up with the new, faster, better chip each year. Oil companies produce the same product year in and year out. And they do invest in R&D by funding the oil service companies who are ... wait for it ... tech companies.

4) Clean Energy Is The Golden Path To The Future. Ah, here's the real point of the speech. This too was expected. A big push for research into clean energy tying in a recovery in the economy and "millions and millions of jobs". He did note that the effort to shift the U.S. to cleaner energy would come with costs. He didn't even attempt to quantify those, a time line  for the change over, or how much the energy base would be shifted.  Basically he said this will have costs but that to those who say we can't afford it, he said we "can't afford not to do it."  Uh huh. I'd rather see the horse in front of the cart that is this weak economy first sir. Sounds like higher taxes on energy companies but again, no specifics. Don't get me wrong, I'm all for clean energy but I think the free market and not unfunded government subsidies are a better road to getting there with the transition period being shouldered by U.S. natural gas and clean coal.   And wait a minute. Don't we have natural gas out the wazoo? And isn't it clean (about half the carbon foot print of coal)? No mention whatsoever.

Zman Speech Grade: C- for too many quotes lifted from JFK and FDR speeches and a general lack of specifics.  I'm tempted to give him a D for failing to mention natural gas at all. Talk about a clean form of energy we already have. Sheesh.
 


In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today – WIOWIO ZLT Edition Part II
  5. Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $6,000
  • 97% Cash
  • Yesterday’s Trades: None ... just not a lot of catalysts in the immediate term.

 

ZIM (Zman Inefficient Markets portfolio)

  • $8,400
  • 74% Cash
  • Yesterday’s Trades:
    • HAL – Added (10) HAL June $25 calls for $0.41 with the stock at $24.70. See today’s post and comment #21 today for reasoning.
    • HK - Sold (75) June HK $21 calls for $0.75, up 186%.

Commodity Watch:

 

Crude oil rallied $1.82 to close at $76.94 yesterday.  Strong equity market and a weak dollar. After the close, the API released a bearish looking report with across the board builds (see below). This morning crude is trading looking slightly weaker with lower equity futures and a slight bounce in the dollar.

 

Natural gas rallied yet another 3.6% or $0.18  to close the day at $5.19 yesterday. It's hot, damn hot. And there's also the potential for an early season storm to track into the Gulf although that appears more remote now than it did 48 hours ago. While I can look at the data and say that early storms have historically not assured a busy tropical season I can also tell you that Bastardi and others are calling for a very busy season and are pointing to this early development as an ominous sign.  This morning gas is trading flat. 

 

Early Read On Natural Gas Storage: Street is at 86 BCF for tomorrow’s report.

  • Last Week: 99 Bcf Injection
  • Last Year: 113 Bcf Injection
  • 5 Year Average: 81 Bcf Injection
  • 10 year Hi: 114 Bcf Injection
  • 10 year Low: 56 Bcf Injection

Tropics Watch: Disturbance 92L continues to weaken as it moves across the Atlantic. 

Oil Inventory Preview


ZComment:  We should see a drop in the YoY surplus of gasoline stocks today along with a continued inching up in demand there and a slight boost to demand for distillates.

API Watch: 

  • Crude: UP 579,000 barrels
  • Gasoline: UP 1.344 mm barrels
  • Distillates: UP 2.143 mm barrels


Stuff We Care About Today

WIOWIO (Why I Own, What I Own) ZLT Edition Part II (some interesting, off the beaten track names), tomorrow part III (the mainstays)

TAT - Turkish Delight.

  • Operations concentrated in Turkey, a preferable regime from an economic standpoint to develop oil and gas assets to many places on planet.
  • Production profile is largely natural gas at the moment and gas in Turkey, which is almost all imported trades in excess of $9 / MMBtu.
  • Production growth via re-entries and exploration is expected to grow significantly in 2010 and again in 2011, especially on the oil side.
  • There are also some "swing for the fence" type plays, with large oil targets that are analogues to recent exploration in nearby Kurdish lands just over the border in Iraq.
  • As far as volatility goes, this may be my most vulnerable name and as such it's definitely one that I look to add on weakness not strength. Right now, I'd like to see them get further along in their Turkish plans before I consider adding any more.

SSN - Australian Based Bakken and Niobrara Play

  • Micro cap with section sections in the Bakken (a little over 3,600 net acres) and 40,000 net acres in the Niobrara.
  • The Bakken stuff is nice for cash flow and news events but I'm now in this one for the Niobrara play and the potential for a takeout of the name.
  • This is not one that I would normally hold as long as I already have but I plan on holding it through year end and it should move better again following the closure of their rights offering. My expectation that oil prices will be higher through year end and into the next couple of years also provides a bit of comfort.
  • If you put a $2,500 per acre on their Bakken position and ignore their other assets, the Niobrara acreage is valued at just under $1,100 per acre, which is not going to be considered pricey and part of my thought that this name goes away over time or get's a better valuation that it doesn't.  At present, their acreage could prove enticing enough for EOG, who has a large slug of acreage just to the south of SSN, or some other Niobrara player to pick them up and it would barely be noticed even at a significant premium for most of the potential acquirers.   
  • However, there is no guarantee that all Niobrara acreage is created equal, in fact it is almost certainly not. EOG has been very active in the play having filed 10's of drilling permits and is rumored to have good wells in the play. I plan on adding a real Niobrara play in terms of held stock (maybe EOG or SM or PETD and this name is only a wildcard and not a substitute for that).

EXXI - Oily Gulf of Mexico Player with Wildcard Potential in the Ultra Deep

  • Management is exceedingly talented, John Schiller hails from Ocean Energy, used to work for APC's Hackett and is a gas finding kind of guy.
  • EXXI's portfolio is a little different than most of your Shelf (shallow water) players:
    • 1) It's oily with 68% of production coming from liquids. Most names on the shelf are much gassier
    • 2) It's reserve life is longer at 11 years
    • 3) It has a large inventory of drillable exploitation and exploration projects
    • 4) It is at the forefront of the ultra deep Shelf play along with partner MMR
  • Balance Sheet: on the extended side at 65% but that should come back into line this year and next as recently acquired work interests merely bumped their ownership in existing fields in the Gulf.
  • The main reason I own it is the exposure to the deepshelf, not just the current Davy Jones target but another dozen prospects which, if they work, and that's going to take at least 5 years to know for a majority, will yield a much bigger but lower cost company than the existing one.

Looking at the ZLT and WIOWIO comments of today and yesterday you may be tempted to say, "Z you are overweight the Bakken. You've got AEZ, BEXP, KOG, SSN, and WLL who have big positions there." I'd respond that:

  1. AEZ is the small name with running room and likely to be the next BEXP like mover,
  2. KOG and WLL are the deep value names, obviously on quite different scales,
  3. SSN doesn't really count (I hold it for the Niobrara) and either way, as a true penny stock, its a total wild card,
  4. and  I am constantly watching NOG, CXO, CLR (pricey) and others in the area.
  5. I have been on the "oil is preferable to natural gas" in terms of E&P exposure for some time now and the Bakken is one of the more economic plays in the oily portion of the U.S.
  6. A word on the weighting in the portfolio as to oil and gas will be included in tomorrow's post.

Tomorrow: KOG, CHK, NFX, SWN, ROSE

 

Other Stuff:

  • Tesla Files For IPO
  • BP Spill Watch:
    • U.S. bumps estimate of daily gush to 60,000 bopd
    • Fitch cut APC's outlook to Negative after the gush bump.
    • B of A put restrictions on trading oil with BP

 

Odds & Ends

Analyst Watch:

  • BMO adds E&P names:
    • WLL, XCO, XEC, EQT, SM, VQ added at Outperform
    • BRY, SD, PVA added at Market Perform
  • HAL - estimates raised at Susqeuhanna - keeps target at $38 and Buy rating. Company says activity and pricing in NAM are trending better than expected during 2Q.

Interesting Reading Watch:

 

197 Responses to “Wednesday – EIA Oil Inventory Preview, more WIOWIO”

  1. 1
    zman Says:

    Housing starts at 593 K vs 623K expected

    PPI in line

  2. 2
    zman Says:

    British PM Cameron doing a little defense for BP, saying BP must have protection from claims 3 and 4 times removed from the spill. Little late pal.

  3. 3
    jat Says:

    HAL near term estimates also raised at RBC and Sterne Agee.

  4. 4
    jat Says:

    Re RIG/APC bonds, would be interested in BOP’s opinion. Barron’s out today with a positive piece on the rig converts.

  5. 5
    BirdsofpreyRcool Says:

    jat — I don’t know how to quantify the risk in RIG… although I think APC will escape serious harm while being thwacked by the Obama/Holder Ugly Stick. That said, I find it tough to believe that we will see serious damage to RIG’s stock price in a year either. But, I don’t know. That said, I am always more comfortable with E&P assets backing bonds, than service assets. But if you’re buying a convert (unless it’s “busted”… the only kind I will buy), you are betting on stock price recovery but want to get paid a little to wait. Would have to look to see if RIG/APC converts are busted… eli will have more insight there.

  6. 6
    john11 Says:

    From Dahlman Rose..
    Dalhman rose notes that this past week, Shelf GOM operators finally outperformed, driven by McMoRan Exploration (MMR); Energy XXI (EXXI); and Plains Exploration (PXP). Natural gas has also continued its recent strong run, as storage numbers seem less bad, the drilling moratorium nags supply, and economic data seems supportive; natural gas and oil finally moved up together. They think momentum and fundamentals still favor the group operating in the Ultradeep Shelf: MMR, EXXI and PXP; as gas has found strength, they think Petrohawk Resources (HK) is a good option to play positive sentiment in natural gas.

  7. 7
    BirdsofpreyRcool Says:

    Opinion piece by Bloomberg writer on BP/US Govt involvement…

    http://www.bloomberg.com/apps/news?pid=20601039&sid=aPwxFS5twvGY

  8. 8
    zman Says:

    Obama v. BP at 10:15

    S&P opening down at the 200 day average or there abouts.

    Thanks for the HAL commetn Jat, had not seen.

  9. 9
    zman Says:

    Barclays out with their annual piece on capex, says international spending will be up 9% this year, sounds very similar to Herold yesterday.

    HAL only thing green on the screen five minutes into the day. Stock chart looks interesting as well.

  10. 10
    BirdsofpreyRcool Says:

    (Barclay’s is a JSH client… )

  11. 11
    apbd Says:

    Z:
    Site slow to refresh.
    apbd

  12. 12
    zman Says:

    BOP – HA, LOLOL. I never knew that. JS Herold’s does all the legwork and Barclays adds some blurbs at the front and publishes? Must be nice.

  13. 13
    zman Says:

    APBD – thanks, actually very fast for me today (for once), is your browser slow on other sites as well?

  14. 14
    elduque Says:

    TED unchanged

    Baltic continues to drop like the Titanic.

    Don’t really know what to make of the index, there are all the supply side (no. of ships) involved, in addition to the demand to move ore.

  15. 15
    zman Says:

    Got sent a piece from Seeking Alpha this morning on BP, basically said time to buy BP is probably a couple of days after the divy suspension. I’d say its more like the day of the suspension as things move fast these days. I do however think that BP has got to push back a bit on any kind of talk about you pay everything we ask without question. There’s no need to set aside $20 B all at once, it will only damage the company’s ability to pay that much over time. I’d suggest paying into the fund quarterly and to have good insight first into who gets to administer the fund. Otherwise they should change their name to Bailout Package.

  16. 16
    tomdavis12 Says:

    BOP: RIG has 3 busted converts. Eli had pointed out when you were away. They are putable 12/10, 12/11 & 12/12

  17. 17
    scoop006 Says:

    #15 change name to BARACK PETROLEUM

  18. 18
    zman Says:

    Eld – It is behaving more oddly than usual. I don’t see evidence that demand for iron ore, coal, are dropping from Asia.

    Scoop – ouch. That’s worse than Broken Pipe. By the way, apparently the speech did nothing to calm Britons on this issue, very upset with BP characterizations in the issue so far. Nicky?

  19. 19
    jat Says:

    Re 8, no problem. Looks like UBS as well, all full throated today.

  20. 20
    zman Says:

    Still seeing people on the Gulf Coast having trouble getting paid by BP. I’d say FEMA would pay it more slowly but in any case, if U.S. citizens are having trouble with BP on the issue I’d think the U.S. could pay them and then bill BP. I mean, if Gaza can get a $400 mm check in the blink of an eye you’d think we could help the Gulf Coast too. I’m not getting political but the president is mucking about in my soup. Enough said until I get notes on the BP visit to WH.

  21. 21
    zman Says:

    Jat – yes, thanks, big run early met with sharp selling on just as much volume. Guess would be it outperforms all day and if the market moves back to yesterday’s close HAL really breaks out. This has been overdone and as much as some in govt. don’t care for HAL, the documents out in the last few days really take them off the hook in my book.

  22. 22
    Nicky Says:

    Good morning all. A little lower overnight than I thought but still within the range where we can eke out another high. Support is at 1098 – 1103. Chart looks reasonably constructive this morning and it appears we are working on the final v of this move.

  23. 23
    zman Says:

    ZTRADE – ZIM – HAL

    HAL – Added (10) HAL July $28 Calls for $0.62 with the stock at $25.75. Same reasoning as yesterday. I will take profits/losses in both sets of the June calls in the near future.

  24. 24
    zman Says:

    Thanks much Nicky.

  25. 25
    zman Says:

    Oil inventories in 20 minutes, will try to get through the EIA’s new format a bit faster this week.

    Oil trading flat.

  26. 26
    zman Says:

    By the way ROSE was out with an 8k, reiterating volume guidance for the year at the 145 to 155 MMcfepd level. Capex at $280 mm looks reasonable but I didn’t have a number for them there so I think that may be a new official number for spending.

  27. 27
    zman Says:

    BP has hooked up a second collection avenue to the q4000 ship via a tie in to the BOP. No word on rate of collection from this second system.

  28. 28
    zman Says:

    By the way, slip of the trading finger had me double up on the June $26 HAL calls earlier (thought they looked like a great deal but I was trying to buy Julys). So when I punt the $26’s either today or tomorrow you’ll see 40 go out the window, not 20. I then added a small position that I had initially planned in the July’s to compensate. I also still own the 10 June $25s added yesterday. Will probably punt those when BOP tells me I’ve held them too long.

  29. 29
    BirdsofpreyRcool Says:

    z — you crack me up. 😉

  30. 30
    zman Says:

    Just making sure you’re awake 😎

  31. 31
    BirdsofpreyRcool Says:

    Mrkt still trying to figure out what it wants to do. Credit started pretty ugly this morning (pre-stocks), now about flat. TED wider by just a micro-smidge from y’day’s close. HeadTrader saying it’s 50/50 which way is gonna win today. Traders continue to sit on the sidelines (assuming 1) they are still there, and 2) they are still awake).

  32. 32
    zman Says:

    EIA Oil Inventory Report

    Crude at 76.72 just prior to report

    Inventories:
    Crude up 1.7 mm barrels
    Gasoline down 0.6 mm barrels
    Distillates up 1.8 mm barrels

  33. 33
    zman Says:

    More EIA

    Imports were 9.7 mm bopd, that’s up slightly and a contributing factor to the bigger than expected build.

    Refinery throughput remained high.

  34. 34
    scoop006 Says:

    Z- Any reason SUN is +

  35. 35
    zman Says:

    more EIA

    Demand:
    Gasoline: 9.338 mm bpd, that’s up sharply
    Distillates: 3.845 eased slightly, still elevated.

    Also noting that kerosene demand continues to fall. Less people flying.

  36. 36
    zman Says:

    Scoop – have not tracked it down, assuming a buy rec somewhere as it was up very early this morning in the pre market.

  37. 37
    zman Says:

    EIA nutshell. Headline numbers are not what the market wanted but oil should not simply fall out of bed unless the S&P does. The gasoline demand number is a good thing to see.

  38. 38
    scoop006 Says:

    SUN: Spinning off the coke manufacturing operations

  39. 39
    zman Says:

    Your tax dollars not at work:

    The delta on refinery throughput this week vs a year ago is the same as last week. To the barrel. Come on guys. That’s statistically impossible.

  40. 40
    zman Says:

    Scoop – OK, thanks. Other refiners not really reacting to this report. Could be setting up for beats in 2Q with these crack spreads.

  41. 41
    AAA Says:

    Not sure if this has been posted before but it is very scary. http://www.theoildrum.com/node/6593/648967
    Basically, there is a very real threat the well is internally damaged, erosion is making it worse and ultimately the BOP may just topple over due to lack of support. Race against time to get relief well in place before all containment is lost and basin empties into Gulf.

    Probably best to hold off on buying any oceanfront property for now.

  42. 42
    tomdavis12 Says:

    BOP: I am seeing some of the BP bonds bidding below 80 out in ’17. Since the bond market always gets it right before the stock market does, what levels on the bonds signals a big problem in your mind? I had used 70 during the Worldcom mess.

  43. 43
    zman Says:

    Obama apparently met with BP for less than 20 minutes.

  44. 44
    zman Says:

    Oil trading back to where it was pre report.

    Gasoline stocks fell to 4% over the 5 year average and 6% (from 9% last week) over year ago levels.

  45. 45
    zman Says:

    Things that give me pause:

    Cushing stocks back to record highs AND Midwest refineries running at pretty high levels of capacity (90%) , higher than the national average. The area is going to need to step it up or crude is going to have to live with higher Cushing stocks than normal or crude is going to come in a bit.

  46. 46
    BirdsofpreyRcool Says:

    TomDavis #42 — you are correct… below 80 is usually considered “distressed” in high yield land… in investment grade (which has much lower coupons to begin with, so dollar price doesn’t get as low as fast), distressed is measured as bonds trading more than 10 percentage points above treasuries (+1,000 bps spread to underlying treasuries). Headline went past about 10 mins ago that BP bonds due 2011 are trading at +1,001 bp spread.

  47. 47
    zman Says:

    BOP – also saw a headline that Fitch says the CDS spread for BP is now too high.

  48. 48
    BirdsofpreyRcool Says:

    People in the industry think it is a given that BP will get it’s “operator status” pulled by the US Govt. Not sure what that means, when BP owns 100% of the WI in the well… but I would not be surprised at all, if this happens to BP’s GOM wells, at the very very least.

  49. 49
    milepost_43 Says:

    new TGA presentation..note “blue fairway” pg18 —
    http://www.trans-globe.com/investors/presentations-and-events/index.php

    maybe a little overbought but 8.02 now..from IR May 27 “We expect to complete the frac during the second week of June”..Fracing results should be catalyst

  50. 50
    zman Says:

    Sounds like BP honchos spent an hour total in the White House, with Obama stopping by for 20 minutes in the room. Is there something more pressing at the moment than this? In his shoes, I’d be meeting with them for as long as it takes if I wanted to solve things. If I wanted to just throw an arbitrary tab for fixing everything then I’d keep it real short and not have an actual discussion. I guess he’s going for the latter. That’s short sighted. But I guess if the 2nd or 3rd or 4th stimulus package fails to work you can always blame BP for that so no reason to cuddle up to them now. Sheesh. Ugh. Sheesh.

  51. 51
    zman Says:

    BOP – yep. Amounts to theft in my book. They are the biggest producer of oil in the U.S. and I think the largest producer in the Gulf as well. The reaction here is all wrong for actually getting it solved. The implication is they wanted this to happen and are lolly gagging on fixing it. No one on the planet has more incentive to fix this quickly. If there is an accident because they hurry I wonder who is responsible.

    Thanks MP – I’ve been lolly gagging myself on getting that one reviewed.

    HAL working pretty nicely now.

  52. 52
    BirdsofpreyRcool Says:

    BP f*cked up royally. I hope senior mngmt fries in a very hot part of the universe. That said, I worked for Amoco long enough in the 80s to get a small pension from them someday. Amoco was bought by BP… if BP goes BK, not sure what will happen to that future monthly check. But since BP is not a Union Shop, I have a feeling that the US Govt will feel no guilt in stepping in ahead of penion obligations in this case (quite the opposite, when it came to the UAW). This is just a really sad, really really suck-y situation… all around. BP is populated by a lot of ex-Amoco and ex-ARCO people who had spotless safety records at those companies. BP acquired those fine US companies and “safety and maintenance” went out the window.

    I would like to meet Tony Hayward in a dark alley… it wouldn’t be pretty. But he’s a whoosie… so i’m pretty sure i could take him down.

  53. 53
    zman Says:

    BOP – I think tomorrow will be the turning point for the stock. It either turns lower or higher. Duh. But my sense is that it goes higher, that once some uncertainty about what the U.S. wants is removed, the stock gets a reflex rally. If the U.S. decides to push them into BK that would be utterly stupid. Many of the 23,000 jobs in the U.S. would go away as this wouldn’t be a simple reorg but instead a carve up, an auction by the U.S. government. I’m not defending BP at all, everyone knows they cut corners, to use your phrase, they “BP it”. Quite the opposite at XOM where everything in a well is kitchen sinked. Anyway, I just don’t like the tone being struck by D.C. as I don’t see that it solves anything.

  54. 54
    BirdsofpreyRcool Says:

    #52 — that said… what the US Govt is doing to BP should make anyone in private industry very very VERY scared. There is just NO legal prescedence to step in and ORDER a company how to spend capital, pay a dividend, or set up a lawyer-suckage “trust fund.” If it isn’t in the regulations, Obama can’t do it. Doesn’t mean he won’t, tho, with Holder by his side. But be very very afraid if that happens. That is Hugo Chavezism, up-close and personal.

    We caught a glimpse of that with the Chrysler “greedy bondholder” bulldozing. People sat around and said “it’s a one-off… won’t happen to MY company.” Wonder why i went ballistic when that happened? So very sorry to see those pidgeons coming home to roost. Wake up people, this is real… and this is the worst nightmare of a “free and capitalist system.” The Slippery Slope just got a whole lot steeper.

  55. 55
    zman Says:

    JB, when you get a chance, can I get a very near future read on HAL? I’m thinking to sell out of calls today or tomorrow in the June strikes. A little longer term it looks like no real resistance until we get into 28 -29.

  56. 56
    Popeye Says:

    If we are past the tipping point where anyone can stop this well the world is going to be a very different place and not just for the oil guys.

  57. 57
    cargocult Says:

    Anyone know why ATPG getting so much attention?

  58. 58
    BirdsofpreyRcool Says:

    Only a 20 minute meeting with BP??!!!… do you think the scales are falling from people’s eyes now? A majority of voting Americans pulled the lever for this guy… he is who he always was. People just didn’t see it… or didn’t want to.

    Sorry… but a 20 min mtg (!!!) is just Rant Material.

  59. 59
    BirdsofpreyRcool Says:

    cargo — ATPG… some people think it’s short covering.

  60. 60
    elijahwc Says:

    Inquiry on the RIG converts earlier this a.m. and the article on the in Barron’s today

    I would not be a buyer yet as their clients are still going force majeure on them but am getting more interested.

    Also, in my opinion, given the circumstances the 1.5% issue furthest out
    (the Cs) are the best deal by far as all three are pari-passu if something
    bad happens, and, if something really bad happens it should happen before
    the end of this year.

    Might as well get the biggest return, at the lowest cost, for the longest
    period of time, if the working thesis is that these are money good.

  61. 61
    zman Says:

    Re ATPG – don’t see any news, could be a deadcat bounce. I’m holding off. If they are going to be subject to $10 B liability cap then it might as well be unlimited for the little names.

  62. 62
    zman Says:

    BP trying to bounce.

  63. 63
    AAA Says:

    BOP, re #54, you were right then and you’re right now.

    One thing the left is good at is getting their hands on other people’s money. BP can’t be any more despised, so they have little to lose from telling BO to stick it.

  64. 64
    zman Says:

    Reuters opinion piece just out saying chairman and CEO at BP have to go. Talk of replacing chairman with Tony Blair.

  65. 65
    BirdsofpreyRcool Says:

    Alert: BP Agrees to Place About $20 Billion in Escrow for Spill Claims
    2010-06-16 15:58:41.582 GMT

    Alert: BP Agrees to Place About $20 Billion in Escrow for Spill Claims

    June 16 (New York Times) — The White House and top executives of the energy giant BP have tentatively agreed that the oil company will pay about $20 billion over several years into an independently controlled fund to pay compensation to people and businesses harmed by the immense oil spill in the Gulf of Mexico. The fund would be overseen by Kenneth Feinberg, the prominent lawyer who ran the compensation fund for victims of the Sept. 11 terror attacks and is the government’s special master for executive pay under the TARP program. President Obama demanded the creation of such a fund in his national address about the oil spill Tuesday evening, and met with company execcutives at the White House on Wednesday.

  66. 66
    zman Says:

    Thanks BOP, just saw it. Better have assurances that this doesn’t become a govt. slush fund.

    Note the words “over several years”

    BP slightly green.

  67. 67
    AAA Says:

    I think people are reacting as if this is the limit of BP’s liability. I don’t see how that can be.

  68. 68
    BirdsofpreyRcool Says:

    AAA — #67 i think you are correct…

  69. 69
    milepost_43 Says:

    TGA IR email update on horizontal frac
    “Yes, we pumped part of the job yesterday, and should finish the hz by
    tomorrow. Then on to the verticals.”

    ——Original Message——
    To: Scott Koyich
    Subject: Re: Horizontal Frac equipment??
    Sent: Jun 15, 2010 8:27 PM

    thanks again for your earlier info.
    Is the horizontal fracing underway? Still anticipating results by Jul 1?

  70. 70
    zman Says:

    Thanks MP

    Crude at 77.50, trading with the S&P, shrugging off the bigger than expected builds in crude and distillates. Also note that RBOB is up 1.25% today on the stronger gasoline demand numbers. Refiners still not yet noticing.

  71. 71
    elijahwc Says:

    RAME – Rodman out with a “pricing” of RAME’s strategic review process which comes up with $3 to $3.50 price in a deal. That’s a pretty big premium. Also, a couple of other catalyst below. Any thoughts?

    “Review of strategic alternatives not unexpected. The company is reviewing strategic alternatives—including a sale, refinance, or recap—and has engaged Jefferies as advisor to that end. Our take: the move is not particularly surprising given the discount RAME was receiving in the market. RAME shares were trading at $1.92/Mcfe for its proved reserves prior to the announcement, nearly half its peer group average of ~$3.80/Mcfe despite an oil-weighted asset base (~55% of reserves and ~65% of production). Looking at recent corporate deal comps, one that closely resembles the company’s portfolio was Apollo’s buyout of PLLL last September (when WTI was trading ~$70/Bbl). If we were to apply the ~$2.45/Mcfe proved valuation from this deal, it would imply a takeout price of $3.00-$3.50/share for RAME. Other oily M&A transactions over the past 12 months have also averaged ~$2.50/Mcfe.

    High leverage is the concern. We have been expecting a refinance/recap from RAME in the near-term as the company’s net-debt-to-cap ratio has been lingering at ~100% for the last several quarters and $135 million of debt (representing 55% of its debt load) is becoming short-term in November. Concerns about the company’s leverage have certainly been a factor in its trading at a discount to the peer group. In our view, a recap to clean up the balance sheet is the most obvious move to close the value gap in the stock.

    No change to target price or estimates. Outside of the announcement, it’s business as usual for RAME. We continue to expect the company to produce 6.9 MBoe/d in 2010, at the low end of its guidance range of 6.9-7.1 MBoe/d. We note, however, that RAME has an upcoming catalyst with its shallow-oil exploratory project at the Osage Concession in Oklahoma. It is currently conducting a 3-well vertical pilot program with results expected by the company’s Q2 earnings call. Success at the project would be incremental to the company’s production guidance and to our forecast.

    RAME on the Russell 3000 preliminary adds list. Separately, RAME was included in the list of potential additions to its 3000 Index published last Friday. This should provide some additional momentum to the stock as index players position themselves accordingly.

    Rating maintained at Market Outperform. No change to our opinion on the stock as the news was not unexpected. We continue to think RAME shares appear attractive given its liquids exposure and upcoming oily catalyst at Osage. We remain buyers at current levels and see ~25% upside to our $2.75 target. We arrive at our target price by applying a 1x multiple to our NAV of the company’s proved and risked upside reserves, valued at long-term commodity prices of $75/Bbl and $6.00/Mcf. “

  72. 72
    zman Says:

    No intelligent thoughts from me on RAME, not my cuppa tea.

    CNBC mentioning that OAS, a new Bakken player is coming this week. I recall the original filing, will have comments when it arrives.

  73. 73
    zman Says:

    WLL withing $2 of its May high now. Oil is quite a bit lower, stock is still cheap.

  74. 74
    cargocult Says:

    BOP-What would you like to be hearing from the President right now? What do you imagine former President Bush would be saying at this moment in this disaster? Americans are unique in that we expect that someone must be responsible for every mishap, as if we are born with a perfect life ahead of us and if anything or anyone interrupts this expectation then they must pay, specially if they have lots of money.

    Every now and then a volcano, hurricane, or some such comes along and reminds us that we live in precarious balance with life altering forces that can impact us for years to come. This oil blowout is one of those occasions, in my opinion. The American people do not like to be reminded of this and it is political suicide to do so.

    Besides, BP took huge risks to bring in what was sure to be a big well, and things went very wrong and it may be because they weren’t cautious enough. They presumably knew the risks and stood to reap the rewards. Now they suffer the loss. If that isn’t how the system works, then how does it?

  75. 75
    zman Says:

    CNBC talking head belaboring the question “where are they going to get this money, out of cash? blah, blah, blah”.

    Reading the blurb from the NYT piece it says over several years.

    BP has cash flow at present of between $7.5 and $8 billion per quarter. $2.5 B goes to the dividend. Another $3.5 to $4.0 goes to capital spending. They can pare both back and along with the FCF easily get to $20 billion, especially “over several years”.

  76. 76
    john11 Says:

    Would think a successful OAS offering would certainly be a positive for valuations on the other Bakken players.

  77. 77
    zman Says:

    Cargo – I’ll take a shot at that. I think he should be saying:

    1) what do you need that you don’t have. We’ll get it for you and bill you later.

    2) It looks like you messed up, lets examine how you’re going to fix this without unduly stressing the company to the point of breaking it and then … not fixing the problem because its tied up in BK.

    3) Really focus on taking care of the Gulf problem and not combine it to push the alt energy agenda. Fix first. Do that other stuff later. I know that goes against the Rahm Emanual line about “never wasting a crisis” but so be it.

    Not defending BP and not attacking Obama. Truly he is powerless to plug the hole. But I think he needs to work the problem and not use it for other means. I also think he needs to activate FEMA and pay people and not gripe about how an oil company is unable to handle the logistics of handling salaries for shrimpers and fisherman. Again, this could have been a much smaller and U.S. based firm that did this and the approach of having left it up to them would have had much worse results than BP has managed.

  78. 78
    zman Says:

    John – in short yes. In more depth though I have not seen what sort of trailing P/CF or $/ BOE they are putting on the assets. Will do some work on it pretty darn soon.

  79. 79
    bondbuddha Says:

    If I might add to Z’s comments in 77, I do not hear anyone in Govt addressing the issue that they have not staged any cleanup crews, vessels, equipment anywhere along the U.S. Gulf Coast while enjoying years of lease sales and royalty payments. They could have been much, much better prepared if those revenues had been used to protect our shorelines.Instead they choose to be infantile and blame blame blame.

  80. 80
    AAA Says:

    cargo,

    This was not a natural disaster but a preventable event apparently caused by BP’s carelessness. Multiple oil industry experts and companies have criticized their actions and their response.

    I think candidly part of the blowback on Obama is payback because of what many felt was unfair criticism of Bush following Katrina. It wasn’t Obama’s fault that BP played fast and loose with a dangerous well, and it wasn’t Bush’s fault that the democrat politicans running NO and Louisiana couldn’t organize an evacuation.

    That said, Obama’s response has been weak and tentative. He sets the tone for the government and for BP, and the tone he set was business as usual. Now we are finding out that he rejected offers from the Dutch for high tech skimmers that obviously would have been invaluable. Other offers of assistance were also rejected, presumably because of pressure for unions not to waive Jones Act restrictions. His sudden Tough Guy act is neither credible nor helpful, since it is obviously poll-driven.

    As for people seeking compensation for having their lives ruined, I don’t blame them one bit. Nobody asked them if they minded BP taking wreckless chances. If BP were the only party suffering a loss, I would agree with you, but I don’t see how any amount of money or prison time will be able to restore the Gulf or our coastline and wildlife.

  81. 81
    BirdsofpreyRcool Says:

    Cargo — #74 the reaction to Enron was to pass Sarbanes-Oxley… the single worst piece of corporate legislation to drive publicly-traded companies who didn’t have to list in the US from our shores. Ok… Enron AND Worldcom… and maybe a handful of others. But to place a huge (and largely ineffectual) and horribly expensive bureaucratic burden on the 99.9% of companies that were NOT enron, is just bad policy. That said, at least it was actual legislation that passed.

    What BHO is doing is an asset-grab. So far, he hasn’t overstepped the bounds of legal precidence (can’t spell that word correctly, for some reason) in this case (as he did with Chrysler and GM). But that is b/c BP is (so far) bending over and shoveling money (as they should, but don’t have to). We all hate BP for this… but, the “boot on the neck” stuff is just plain scary. That doesn’t bother you?

    Do not throw President Bush in my face. Just b/c i disagree with what Obama is doing doesn’t mean i condoned what Bush did. That argument should die a natural death by now.

    Americans don’t like to think that people can get an incurable disease, die of old age, or assume risks when they fill their car with gasoline (or build their homes on cliffs, barrier islands, or below sea level just south of a huge lake). But Stuff Happens. I agree we have to accept that. B/c, just like socialism, eventually you run outta other people’s money if everything is a blame-and-pay game.

    Fwiw, I would NOT expect the first reaction of a president to an on-going disaster (man-made, that it is) to fly Eric Holder to the scene to figure out who to file criminal charges against. For the most part, i thought BHO’s first press conf on the spill was level-headed. But his statements (and Salazar’s decisions) before and after that conf have been just plain wrong-headed.

  82. 82
    cargocult Says:

    BOP-Sorry I mistook that reference to Hugo Chavez(the devil) as an attack. I like your FEMA idea.

  83. 83
    BirdsofpreyRcool Says:

    cargo — no worries. Your comment solicited a lot of good discussion. As i was writing my comment, didn’t see z’s or AAA’s comments b/f posting. But they did a better job of saying what I think.

  84. 84
    zman Says:

    I’ll put something out on TGA Friday, been tied up with the WIOWIO and some family related stuff.

  85. 85
    elduque Says:

    euro loosing some steam. So is crude.

  86. 86
    zman Says:

    re 79. Very good point that I missed making.

  87. 87
    zman Says:

    Eld – yep, and so is the S&P and BP.

  88. 88
    milepost_43 Says:

    OT…anybody have info on how they will handle this temporary riser when a hurricane comes? lay it down–let it “blow” on the bottom? float it somehow so it “blows” on the surface? can’t wait for the media to shout about the +50K into the GOM for a week or so…. thanks…

  89. 89
    cargocult Says:

    I figure we have a working legal system and if one branch of govt oversteps its bounds then we have courts to sort it out. Besides, talk is cheap. All Presidents are political animals and as such must play to their constituency or risk early retirement. I admit it is not the best situation, but it’s ours and I am not for changing it now. Times of peril bring out the best and worst in us, politicians as well. People expect their leaders to solve problems. It’s a bitch when there is not easy solution.

  90. 90
    zman Says:

    MP – they are going to replace it soon with a floating riser system that would have a coupling 300 feet below the surface. This is low enough to prevent wave action from decoupling it from the top of the BOP.

  91. 91
    BirdsofpreyRcool Says:

    cargo — #89 agreed. Govt’s are too inefficient to “solve problems” in a co-ordinated and logical way. But what a good leadership can do is to state facts, show support, and allow for the proper environment for problems to be solved.

    I don’t think the American People would throw someone out of office for stating the truth. But we DO want an Optimist. So, state the truth and then tell people that the right people are working on it. And don’t follow up by smashing the people working on it in the nose… and threaten to throw them in jail. That is not the kind of rhetoric i think most people want to hear. There is always time for jail afterwards, if that is the proper response. anyway, who cares what i think! 😉

  92. 92
    zman Says:

    Planning to unload my HAL calls this afternoon, probably on this little bounce if it doesn’t take out the day’s high.

  93. 93
    zman Says:

    Those would be the June HAL calls, the $25s and $26s.

  94. 94
    Nicky Says:

    The voodoo is postive into the end of the trading day which implies we should still have higher highs out there. That said, I am on the lookout for a top here and then a move back into the 1080’s.

  95. 95
    ram Says:

    People, stop with the hurricane talk.

  96. 96
    zman Says:

    Ram – if you need a good hurricane tracker app for your iphone I would suggest “Hurricane”, it has a lot of the features of the links on the weather tab including fully animated maps. Definitely worth the $4.

    Nicky – thanks much.

  97. 97
    Nicky Says:

    re # 81 and 91 BOP – as usual very well said.

    Obama, I think has done himself a great deal of damage, especially on the international front and in particular the UK. Not that I am sure the US could care a less about what the UK think. That said we have been your greatest and more recently almost only ally. I think the Brits are feeling like the US has turned on them and they are very angry. This is entirely due to his rhetoric which is just that – rhetoric. It has served no purpose and has just proven that all he does is talk with very little action. Plenty of other countries have offered assistance and he has turned it down – why?

  98. 98
    zman Says:

    Bastardi will issue a public update on the Hurricane season on Monday. Sounds like it is going to be an upgrade.

  99. 99
    zman Says:

    Nicky – for the record, I care what you guys think. After all, we beat you guys over 200 years ago so there’s no reason to do it again. We even tied you in soccer the other day, for shame. Good question your last sentence. Some say it is the Jones Act but not sure that really applies.

  100. 100
    ram Says:

    Unfortunately, I’m still hanging onto a BB. As to paying for a hurricane tracker – I’ll panic or prepare if I see my neighbors doing their rendition of “my hair is on fire”.

  101. 101
    Jerome Blank Says:

    RE: #55 HAL 5 min chart added, daily updated…short term resistance $27, support at $26.20-$26.30….

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  102. 102
    ram Says:

    #98 – Usually upgrade is a positive thing.

  103. 103
    zman Says:

    re 100. Thanks for the out loud chuckle. I have the entire image in mind of the griswold’s station wagon loaded down with a frig on top.

    JB – thank you very much, will go vote.

  104. 104
    zman Says:

    To be clear Upgrade = more storms in this case.

  105. 105
    BirdsofpreyRcool Says:

    Nicky — I was jaw-droppingly aGHAST when BHO’s first act as President was to return the bust of Churchill to the UK. The symbolism of that act was too horrible to contemplate. For as long as I can recall, the US and UK are a people united in head and heart and separated by a single language.

    I am ashamed, as an American, at the bashing the UK is taking from the acts (intentional or not) from our current President. FWIW, you have my apologies.

  106. 106
    West Says:

    Still buying MHR for well results.

  107. 107
    john11 Says:

    KOG back to JB’s longterm resistance line. As always thx for your work and voted.

  108. 108
    Jerome Blank Says:

    RE: #103 and #107, Zman and john, thank you much…

  109. 109
    BirdsofpreyRcool Says:

    And now for some positive thoughts on the world, I bring you XACS#1
    ———————-

    http://www.capmarkets.com/ViewFile.asp?ID1=138675&ID2=422005953&ssid=1&directory=6571&bm=0&filename=06.16.10_Credit_Base_Grows.pdf

  110. 110
    zman Says:

    Finger on the eject button on HAL June calls.

    West – you are referring to their first EFS test?

  111. 111
    zman Says:

    ZTRADE – ZIM – HAL

    Sold the (10) HAL June $25 calls taken yesterday for $1.74, up 308%. Will be selling the $26 strikes shortly.

  112. 112
    Nicky Says:

    BOP – I had absolutely no idea that Obama had returned that statue. That is pretty shocking as you say. Was a reason given?

    You don’t need to apologize – I know you don’t feel the same way Obama does.

    As for the soccer Z – well it was a terrible mistake by our goalie. But everyone makes mistakes…poor guy now has the weight of a country on his shoulders. I probably ought to say this very quietly as we are a nation that eats, breathes and sleeps soccer – our team is overrated! Plus our ‘fans’ always let us down by behaving appalling when they go to these events.

  113. 113
    BirdsofpreyRcool Says:

    Way to book ZIM profits, z. nice!!

  114. 114
    zman Says:

    Nicky – I didn’t want to say anything about the team rating thing but when someone speaking for the team said that Donovan wouldn’t even qualify for the 23 man British team, I knew a comeuppance was in order. As to the goalie, I’d blame that weird new ball. Just bad luck for the poor chap.

  115. 115
    BirdsofpreyRcool Says:

    Nicky — #112… Thank you.

    As far as the bust, no reason was ever given. Am darn curious as to the “why”… but, truth is stranger than fiction sometimes. And as his First Presidential Act (taken just prior to his actual inauguration), it was darn strange and very disturbing.

  116. 116
    zman Says:

    Re 113. Thanks, felt like time to take some off the table and tuck into me skyrocket.

  117. 117
    Geno Says:

    Re- 115
    http://www.newsweek.com/2009/02/20/busted-the-churchill-flap.html

  118. 118
    BirdsofpreyRcool Says:

    DrLink — KOG doing the Happy Happy Joy Joy Dance today. I just sold my 3.22 trading shares, but continue hold a core position.

  119. 119
    West Says:

    #110.. Sorry about that , yes their first EFS well and possible pin action from PXD anticipated JV announcement.

  120. 120
    BirdsofpreyRcool Says:

    Geno — thanks. Mad about the Mau Mau, eh?

    Ha! The state of Mississippi hung one of my great great uncles as a horse thief, back in the 1880s. But it doesn’t stop me from visiting the state… oh well.

  121. 121
    zman Says:

    BOP – Any update from KOG on wells 13-15? #15 the TFS test, correct?

    Just an FYI but I’m warming to AEZ more now but still holding my KOG for the long term. However, if Lynn continues take longer to complete wells after TD then I’ll punt him from the ZLT and just trade him for spikes and dips, sticking with guys who can get the wells completed in a more timely manner.

  122. 122
    zman Says:

    Holy breaking out S&P, 1118.

    Finger on trigger on the HAL $26s now, back from ashes two days ago.

  123. 123
    Jerome Blank Says:

    BOP…CIGX has an interesting daily chart pattern, it printed a significant higher low off the 200 day SMA and now is trying to break above topside trendline resistance right at the 100 day SMA, interessting technical set-up…looks increasingly bullish at the moment…I posted a chart for interested folks…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  124. 124
    ram Says:

    If only the BEXP’s would move…..

  125. 125
    zman Says:

    BEXP from $16 to $19 in the last few days. Should break out pretty soon on news. Probably not in time for this month’s calls but definitely expect it for the July’s.

  126. 126
    BirdsofpreyRcool Says:

    JB — thanks! Will go vote. Hearing the CigRx launch is now week after July 4th holiday week (so July 12th). Got slowed down on designing the packaging. Lawyers wanted to make trebly-sure that no claims were made that would tickle the antennae of the FDA. Can’t argue with that logic.

  127. 127
    Jerome Blank Says:

    RE: #126, BOP thank you…

  128. 128
    ram Says:

    …..above $20 before this Friday.

  129. 129
    zman Says:

    Ram – No, I wouldn’t expect that but they do speak tomorrow so may have news and a move.

  130. 130
    BirdsofpreyRcool Says:

    z — #121 no new update on well status. Will go check. KOG met with one of it’s largest shareholders about 2 wks ago, they have been aggressively buying “trading shares” here.

  131. 131
    DrLink Says:

    BOP Re- KOG Roger That!

  132. 132
    BirdsofpreyRcool Says:

    z — addemdum to #121… i would not take it personally, if you switch from KOG to AEZ. This is a Swing Trading market… day-traders and long-term holders are having a tough time.

    The hardest part is taking profits and then sitting on your hands, waiting for the Big Stupid Move. Need to keep dry powder at your side, in order to take advantage of that. So, sold the KOG trading shares to replenish the powder horn.

  133. 133
    zman Says:

    Thanks, I know and appreciate the update. I’d bet they get 13-15 down in time for the 2Q.

  134. 134
    West Says:

    JB, how much weighting do you place on McClellan Oscillator? Seems to be at a high here. Thanks for all your hard work, voted.

  135. 135
    zman Says:

    Obama speaking on Gulf Fund now.

  136. 136
    zman Says:

    “BP is a strong, viable company and it is in all our interests that it remain so” ~ Obama.

  137. 137
    BirdsofpreyRcool Says:

    #136 — “amen” to that. The Unintended Consequences of bringing down BP are unthinkable to me.

  138. 138
    BirdsofpreyRcool Says:

    But i would STILL like to punch Tony in the nose!

  139. 139
    zman Says:

    BP to create $100 mm fund for out of work oil workers (due to the moratorium). That’s more than fair on their part since they didn’t make the decision to close down the deepwater. However, that’s less than 10 days of Louisiana salaries attributable to the deepwater.

  140. 140
    elduque Says:

    What is your early read on NG for tomorrow.

    Below or above consensus.

    P.S. no holidays this last week

  141. 141
    BirdsofpreyRcool Says:

    BP cancels divd for 1st 3 qtrs of this yr.

  142. 142
    zman Says:

    BP – no more dividends this year.

  143. 143
    zman Says:

    El – I’m right in line.

  144. 144
    BirdsofpreyRcool Says:

    whoa… BP is canceling their previously declared divd too.

  145. 145
    Jerome Blank Says:

    RE: #134, West, thank you for the vote…I updated the McClellan last night, and I agree with you, $NYMO is in overbought territory, I find the interpretation under current conditions to is a bit difficult with the SPX breaking above the 200 day and on a new P&F buy signal…we could be in a condition where the overbought condition slowly wears off with shallow $NYMO pullbacks rather than a whoosh lower below the 0 line…

  146. 146
    zman Says:

    BP stock should now feel free to get up and move about the cabin.

  147. 147
    zman Says:

    BP to pay in $3 billion initially this quarter, then $2.5 billion next, then $1.5 billion thereafter (think I got that right, will check). That is not overly onerous.

  148. 148
    zman Says:

    Besides dividend, they are cutting capex and selling some assets. I can see Goldman and others upping the stock tomorrow based on the fall so far and a greater degree of certainty.

  149. 149
    zman Says:

    By the way, the E&P associate analyst on CNBC from Raymond James re BP did a great job. Kudos to Pavel Molchanov.

  150. 150
    zman Says:

    Stepping away for 15 minutes.

    BP up a buck now.

  151. 151
    Dman Says:

    #41 Yes I saw that & it is very scary.

    There is another article:

    http://www.theoildrum.com/node/6611#more

    which presents a different erosion scenario that explains why the flow rate has been steadily increasing and will continue to do so. But this scenario doesn’t assume the catastrophic damage down-hole that the post in #41 does. The author has this comment on the earlier post:

    “Now you will notice that this says nothing about those ideas such as that propounded by Dougr that the casing has been cracked and oil is escaping into the surrounding rock., and that the casing is becoming a lot weaker. There are two reasons for this, firstly if there was a crack, in the same way as with the BOP, then over time that would have been eaten away as oil, gas and mud flowed through it. Once a flow starts it will rapidly eat out a larger passage, as the above has demonstrated. Once that passage was created then oil flow through it to the surface would make it impossible to see what was going on around the well (look at the cloud above the BOP). In fact there are very clear pictures from under the BOP. This would seem to show that there is no oil leaking there at present.

    The other thing to remember is that BP are planning on using the second LMRP cap effectively as a seal on the well. They could not do that if the upper segments of the casing were damaged, and I imagine that they have enough data from the Top Kill testing to reassure themselves of that.”

    … but lets face it, either scenario is awful.

  152. 152
    AAA Says:

    BP shorts facing a tough decision. If you cover shorts now, you may never get to put them back out because BP has become hard to borrow the last couple of days. All this happy talk could give the stock a boost however and lead to a squeeze.

  153. 153
    zman Says:

    re 152 – agreed re short cover decision. But not sure how much is actually short. This would indicate not that much but it could be dated.

    http://shortsqueeze.com/?symbol=bp&submit=Short+Quote%99

  154. 154
    zman Says:

    BP also said they expect APC and Mitsui to “meet their financial obligations”. That’s ominous. APC is going to get into a scrap with them however since this is going to go criminal for BP.

  155. 155
    VTZ Says:

    RE 153 – I doubt the short interest is quite large at this point. Initially of course there was piling on but at this point how can you definitively say it’s overvalued or that the risk of the liabilities is greater than the existing market cap decimation.

  156. 156
    zman Says:

    S&P dropped like a stone back to the 200 day sma.

  157. 157
    AAA Says:

    I don’t know how much is short but BP was unavailable on two brokers this morning.

  158. 158
    zman Says:

    Thanks AAA. Interesting.

  159. 159
    AAA Says:

    VTZ,

    I think the short case here is a combination of respect for the hyena-like qualities of the plaintiffs’ bar and the realization that there is a substantial risk of at least the florida gulf coast being contaminated. People there are not as tolerant of oil spills as in Louisiana, where they see it as a cost of doing business.

  160. 160
    zman Says:

    Simmons & Co. on the tape disavowing chairman Matt Simmons over his BP bankruptcy comments. Matt is leaving the company for good now.

  161. 161
    AAA Says:

    Another factor is funds are definitely not going to want show this name on their end of quarter position sheets.

  162. 162
    zman Says:

    AAA – that may be true for the smaller fund names but the big boys who have in the 10s of millions of shares are not going to be out either way and as such, may add upon relief of some uncertainty.

  163. 163
    BirdsofpreyRcool Says:

    Heard from a long-time guy in this biz that Matt has gone over the edge… guess it’s official now.

  164. 164
    AAA Says:

    Maybe so, but I don’t see the relief from uncertainty. All they’ve done is suspend the dividend and agree to hand over $20 bill to Obama. That’s a positive?

    It’s not like Obama can prohibit people from filing claims, although he may not be totally clear on that concept.

  165. 165
    BirdsofpreyRcool Says:

    #161 — on the other hand, Bill Gross publicly stated he bought BP and APC debt…

  166. 166
    AAA Says:

    Re #165, debt has priority in bankruptcy over tort claims, not that this administration has any respect for bankruptcy law.

  167. 167
    AAA Says:

    sorry, debt=secured debt.

  168. 168
    BirdsofpreyRcool Says:

    AAA — I used to think that too… until C… GM…. the Rule of Law is less clear now.

  169. 169
    BirdsofpreyRcool Says:

    And debt is rarely “secured” at investment grade companies. Even bank debt is usually unsecured (albeit senior).

  170. 170
    zman Says:

    Re 164. Yes, it would have been when I ran money at least. 1) you have a $ figure now, maybe not a cap but it could have been $50B. 2) you have a timeline, it’s not all at once but will take at least 4 years given the schedule they released to fill up the $20 B tank 3) you have defined an asset amount to be sold which is good timing for them because the stock market is way undervaluing their reserves so might as well monetize some to pay this bill, and 4) you have cut the dividend, the fear of said loss being part of the reason for the drop in the stock.

    Again, not a cap but we know more today, a lot more, than the we did yesterday. Obama didn’t call for $20 B in cash up front, like a demand note for instance so yes, I think that’s a actually positive.

    Also, given that payment schedule, if things go OK over the course of the capping and cleanup, it gives investors a light at the end of the tunnel for reinstatement of the dividend.

  171. 171
    BirdsofpreyRcool Says:

    Nicky — is this playing out according to plan? Thank you.

  172. 172
    AAA Says:

    So BP gives in to blackmail, but it’s a positive because the terms could have been worse?

    I get your point but if I were a shareholder, it wouldn’t exactly fill me with confidence about the leadership of the company. If they think this is the last demand from obama et al they are crazy.

  173. 173
    Geno Says:

    I wonder if the asset sale is GOM

  174. 174
    AAA Says:

    Can anyone give even a wild probability of their chances of capping this well versus it just bleeding out?

  175. 175
    zman Says:

    AAA – I think over time the Fund will be added to as well. I’d bet they have had a good look at what the costs along the Gulf Coast could come to in terms of reimbursement for wages, tourism etc. I’d be surprised if this is enough to cover that over the next two quarters. Not saying it’s the best deal but I’m betting Obama threatened them with the loss of their supply contracts to the U.S. military which I understand are pretty good and very large. The timeline instead of lump sump also keeps from stressing the balance sheet.

  176. 176
    bill Says:

    >The fund would be overseen by Kenneth Feinberg,

    im glad he has something to do now

    the first claimants might be people getting their mortgages paid off.. fnma says people affected dont have to pay mortgages

  177. 177
    zman Says:

    AAA – I think they will get it capped eventually, could take as much as a month or two longer than expected but it’s been done (maybe not at this depth of water but I think at this depth of rock which is what should matter).

  178. 178
    zman Says:

    Beerthirty

  179. 179
    zman Says:

    FWIW, two minutes after the close …

    Oppenheimer’s Fadel Gheit on the tape saying the move is a “positive step for BP” and it “reduces the political pressure and public anger in the U.S. at BP and enhances the company’s financial flexibility to meet the high costs of the cleanup and compensation in connection with the oil spill”

  180. 180
    zman Says:

    Bill – surely you jest.

    Geno – Don’t know yet, saw it was upstream and non core so sort of doubt it. Saw the proposed total sale price is $10 B.

  181. 181
    Dman Says:

    BOP – what does “over the edge” mean? And as for it now being “official”, isn’t is just a conflict of interest? i.e. his statements, whether true or not, are damaging Simmons & Co. commercially. So it makes sense for them to part ways but since the company is anything but disinterested, why would you take their word about Matt?

    Nobody knows at this stage if BP or the Gulf will survive. I will say that Matt appears increasingly annoyed … a cranky old man you might say. But not necessarily a crank… more evidence please…

  182. 182
    Nicky Says:

    Okay tomorrow the market has some postive energy pre open and then we should see a sharp reversal once the market opens. So yes going to plan. We may see one more high if that is case, but still in target area.

  183. 183
    BirdsofpreyRcool Says:

    SWN on the tape with a capex cut from $230mm to $185mm for this yr. Also sold $355mm of assets to XCO.

  184. 184
    BirdsofpreyRcool Says:

    Dman — I guess “over the edge” means that Matt has lost the ear of the Old Boys in this biz. Doesn’t mean Matt is wrong… but he has lost the respect of his peers (who increasingly see his comments as off base). Just passing along industry buzz…

  185. 185
    zman Says:

    Dman – I’ve been watching his interview and he seems a little emotionally absorbed and has made some claims about the spill size which unless he has a fleet of mini-subs I doubt he could prove. He’s also made some claims about Ghawar reserves that have not yet borne out. I think he is brilliant, don’t get me wrong but he’s made some wild statements of late and at least in the interviews I saw, just didn’t back them up.

  186. 186
    zman Says:

    re 183. Well they said they’d cut back if gas prices didn’t get up and this little rally is not what I think they had in mind (too late and not enough on the 12 month strip). Makes sense. They are not pressed to hold acreage via the drillbit so while the stock may take a hit, I’ll probably add some to the ZIM. I’d like to see it come off all of the recent move or at least 10%.

  187. 187
    BirdsofpreyRcool Says:

    addemdum to 184 — I think the Old Boys in the Biz respect Matt’s history a lot. And his contributions. So, I can’t provide the “hard evidence” you ask for… who wants to bash Matt Simmons in public? Nothing positive is accomplished by doing that.

  188. 188
    zman Says:

    Yep, I have Twilight in the Desert on my bedside table right now and I met him when I was young pup. Nice office, nice lunch, very animated and obviously brilliant guy. Now he sort of looks like a mad scientist on TV but maybe its just the 10 pounds the cameras add or bad lighting. But the wild claims are not helpful unless you can prove them. Recall that two weeks ago everyone glommed onto his theory about the second leak and went after DO for no reason other than a plan flew over and thought they saw something. Turned out to be utterly false. So if their is a second leak, I say take James Cameron down there and show it to us.

  189. 189
    BirdsofpreyRcool Says:

    z — you’re on a roll today… You’re funny, when you get all fired up.

    If Nicky is right, then we get a rally tomorrow morning that we sell into, correct?

  190. 190
    zman Says:

    re 189

    Henry Hill: You’re a pistol, you’re really funny. You’re really funny.

    Tommy DeVito: What do you mean I’m funny?

    Henry Hill: It’s funny, you know. It’s a good story, it’s funny, you’re a funny guy.
    [laughs]

    Tommy DeVito: What do you mean, you mean the way I talk? What?

    Henry Hill: It’s just, you know. You’re just funny, it’s… funny, the way you tell the story and everything.

    Tommy DeVito: [it becomes quiet] Funny how? What’s funny about it?

    Anthony Stabile: Tommy no, You got it all wrong.

    Tommy DeVito: Oh, oh, Anthony. He’s a big boy, he knows what he said. What did ya say? Funny how?

    Henry Hill: Jus…

    Tommy DeVito: What?

    Henry Hill: Just… ya know… you’re funny.

    Tommy DeVito: You mean, let me understand this cause, ya know maybe it’s me, I’m a little fucked up maybe, but I’m funny how, I mean funny like I’m a clown, I amuse you? I make you laugh, I’m here to fuckin’ amuse you? What do you mean funny, funny how? How am I funny?

    Henry Hill: Just… you know, how you tell the story, what?

    Tommy DeVito: No, no, I don’t know, you said it. How do I know? You said I’m funny. How the fuck am I funny, what the fuck is so funny about me? Tell me, tell me what’s funny!

    Henry Hill: [long pause] Get the fuck out of here, Tommy!

    Tommy DeVito: [everyone laughs] Ya motherfucker! I almost had him, I almost had him. Ya stuttering prick ya. Frankie, was he shaking? I wonder about you sometimes, Henry. You may fold under questioning.

  191. 191
    BirdsofpreyRcool Says:

    #190 — ok. Now you’re scaring me.

    😉

  192. 192
    Dman Says:

    One thing Matt got right in his “interview of doom” was the price of crude. They made him debate it with someone who said it would go to $50. So far, Matt got it right.

    BUT I gotta point out that the 50 day and 200 day averages look like they will cross unless there is a really big move up here. Generally that’s not a good thing.

  193. 193
    zman Says:

    Bastardi on Hannity today at 4 pm EST.

  194. 194
    ram Says:

    Is it possible that the increased flow is due to a failing BOP? If the BOP fails, and the pressure in the ground is less than the ocean interface, will the hole fill up with sea water? Would the sea water in the hole get super heated and blow out the hole?If the energy from the blow out of steam is great enough, could it also create a tsunami???

  195. 195
    Wyoming Says:

    Increased flow is due to the BOP being full open, no longer being choked. The reservoir always has an Absolute flow potential calculated.

    A while back, a HAL presentation was referenced and there was a graph of the temperature gradient. This well is not super heated, not even close, remember we have hydrates being formed 1/3 of the way in the wellbore at the mud line.

    A tsunami will probably form from the frac working going on in Cleburn … along with the increase in earthquakes.

    BTW, now would be the time to do a top kill as they could have 5,000 feet of heavy mud. They could always run in coiled tubing into the riser to act as a boost line. Once they have the riser full of kill mud, they could close in the valves and inject the mud, possibly in conjunction with the kill line they used in the first attempt.

    If that fails, bring in the Geno.

  196. 196
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    Convergence.

    Today FedEx reported Q4 and FY 2010 earnings. It is well known that from a macro perspective, FedEx provides important insight into the state of the global economy. The top headline from the release was that FedEx was providing 2011 guidance in the $4.40-$5.00 range. The midpoint of that guidance is $0.42 below the street consensus estimate of $5.12. For the past few months, we have been noting that we do not have confidence in the current 2011 estimate of $95 for the S&P 500. Today, FedEx provided an example of the convergence necessary for 2011 earnings estimates to move lower and reasonably align with 2010 estimates which still have potential to move higher. FedEx’s new guidance of $4.70 still indicates 25% year over year EPS growth. A lack of confidence in that $95 estimate for next year is likely one of the many reasons the markets multiple is compressed. Investors should be on the lookout for additional convergence between 2010 and 2011 earnings estimates. FedEx traded down on the news, but that should not be surprising considering the stock trades at a 50% premium to the market’s multiple.

    In reference to the broad economy, the FedEx news was a sheep in wolf’s clothing. For a year, we have talked about companies being lean and mean. As revenues have begun to return in the first half of 2010, the lean cost structure has helped margins and boosted profits. As the recovery progresses, companies will need to begin hiring again, increase capital expenditures and reinvest in their respective businesses. In short, they cannot plan for future growth using an organization that has been cut to the bone. FedEx management used the term “strong” 15 times during the call. The reduced guidance was not the result of a poor business outlook. Instead it was the process of returning the business from that lean crisis mode. Factors lowering the guidance costs related to the maintenance to bring mothballed planes back online, increases in variable compensation for employees, restoring half of the 401K match, and higher pension obligations due to the current low historic return rate of markets.

    During the conference call, FedEx management was asked about the status of the $3 Billion in costs they have eliminated during the recession. Half of the reductions were expected to be permanent. The FedEx management response sums up the dynamic we are talking about:

    “You know, the $3 billion and 1.5 (Billion) was obviously a non GAAP analytic snapshot at the time. And then after that we go on and manage our business so obviously, a lot of those cost saves fell to the bottom line. We absolutely crushed our business plan last year, and funded a significant amount of annual incentive compensation that we didn’t think we were going to fund we’re also being very aggressive in international now so we’re spending some of that permanent savings in a different bucket. So the savings is still there. We’re just reinvesting it very heavily. Obviously the earnings are better than they otherwise would have been. I am very comfortable that we have significantly reduced our cost structure by the amount that we said, that we’re adding in other areas as we grow and become more aggressive. I think the rate we’ve given you is pretty thrilling from an EPS growth rate.”

    If a company that serves as a barometer of the global economy is going to reduce its earnings guidance, this is the healthiest manner in which one could see them to do it. Any investors sharing the belief that 2011 estimates are too high, should not be surprised when we see them cut.

  197. 197
    ram Says:

    Thanks Wyoming.

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