Expiry Friday

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Market Sentiment Watch: Expiry Friday, expect pinning action early as traders tune out on the market and in on the U.S. World Cup match with Slovenia. No eco data are scheduled for release today.


In Today's Post:

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

Holdings Watch

ZCAT (Zman Catalyst portfolio)

  • $5,800
  • 99% Cash
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $9,500
  • 65% Cash
  • Yesterday’s Trades: None

ZLT (Zman Long Term portfolio)

  • Yesterday's Trades:
    • OAS – Added starter position of 1,000 shares for $14.94. New Bakken player came public today. Comments in tomorrow’s post. See quick review and mini model below.


Commodity Watch

Crude oil eased $0.88 to close at $76.79 yesterday. This morning crude is trading off a buck. 

Natural gas recovered 18 cents to close at $5.16 yesterday after the EIA reported a smaller than expected storage injection (see below). This morning gas is trading up slightly on the following ...

  • Tropics Watch: 92L is on the horizon of Hispaniola, back from the ashes, with a 20% chance of development into a tropical storm in the next 48 hours.

Natural Gas Storage Review

ZComments: Heat wave eats gas. YoY surplus has now been completely eroded. Much warmer than normal weather is forecast for the rest of the month, more than offsetting higher production and this should yield injections that are below the five year average through June. 

One last gas comment ... past injections are not indicative of future storage levels ... but they can give you a pretty good idea.   In the following graph, we take a look at storage trajectories based on past injection levels. Note 2006,  how it bumps lower for a time. There was a period in mid to late July 2006 of extreme heat which for a short time  actually flipped gas storage into withdrawals. This period was characterized by periods of CDDs a third over normal. That's hot.  This week's forecast of 70 CDDs is 40% over normal and forecasts for June continue to reflect warmer than normal expectations.


Stuff We Care About Today

Oasis Petroluem (OAS) IPO Quick Look

  • IPO raised $395 mm for the company
    • Shares out after deal 92.2 mm,
    • Market cap = $1.36 B
    • Total Enterprise Value = $1.022 B
      • Balance sheet:
        • No debt
        • Cash $339.6 mm (or $3.68 per share)
  • Pure Play Williston Basin Bakken player - North Dakota and Montana.

    • 292,000 net acres
    • 1Q production: 3,295 BOEpd (91% oil)
      • 1,084 BOEpd Sanish (EOG and WLL country)
      • 1,037 BOEpd East of Neeson Anticline
      • 1,078 West of Neeson  (drilling in and around BEXP's Rough Rider)
      • The remaining volumes are non-core, non Williston.
    • Reserves: 13.3 MMBOE. Acreage is largely unproven by OAS but in territory highly proven by offset operators.
  • The 2010 Plan: Spend $220 mm in 2010 drilling 30 net wells in the Bakken with a 4 rig program. Note in the model that follows that I've factored in some fairly conservative assumptions on the incremental production this could lead to but this is very preliminary on my part. Chances are better than not that this forecast is overly conservative and will be lifted as we get more insight into their well results.  Note that OAS is drilling two wells at present in the hear of BEXP's Rough Rider area, in close proximity to BEPX wells that IP'd between 2,000 and 3,600 BOEpd and have demonstrated solid 30 and 60 day average rates. By contrast, I am modeling average IPs of 1,200 BOEpd and somewhat sharper decline rates than offset operators seem to be experiencing in this part of the play.  Obviously there is no guarantee's completions will be on this level but at least they are drilling in the right neighborhood.  

This a brief, first take model and it will be updated as more data becomes available in the near future...

  • Valuation:

    • TEV / EBITDA: 
      • Trades at about just over 16x my preliminary estimate for this year.  While this number is high relative to their peers that is a function of being at the beginning of a production ramp and as BEXP's multiples have contracted (even as the stock has risen) so too should OAS.
    • Acreage: $3,526 / acre. This is more than reasonable given where recent auctions have priced and where their peers are trading.

Nutshell: Oily and extremely Bakken focused with at least 2 years of capex in the bank and no debt. In a month expect glowing Buy recommendations from the underwriting group (Morgan Stanley, UBS, and Simmons plus a host of middle tier and energy savvy banks on the cover). Production should ramp fairly swiftly given where they are drilling, especially since we're building on a small base and running a four rig program.  I took a starter position yesterday.




Odds & Ends

Analyst Watch:

  • BP - Moody's downgrades to A2 (still investment grade ... little late fellas)
  • BP -  Societe Generale upped to Buy
  • Goldman takes FST and SWN off Conviction Buy list,  both get cut to Neutral
  • NFX - Goldman said this is their favorite E&P name and that maintain Buy ratings on DVN, EOG, UPL, and STR.


139 Responses to “Expiry Friday”

  1. 1
    dij Says:

    Since the markets are not yet open, some politics:

    NYT editorial: BP’s cause was hardly helped by “Smoky Joe” Barton, a reliable friend of big coal and big oil and no stranger to rhetorical excess. His “shakedown” remark was too much for some of his Republican colleagues, especially those from other gulf states. Jeff Miller of Pensacola, Fla., said Mr. Barton was “out of touch.” Even John Boehner, the House minority leader, who normally cannot resist a partisan roundhouse, said “BP ought to be held responsible for every dime of this tragedy.”

    Apparently chastened by these and other reprimands, Mr. Barton later apologized for his apology to Mr. Hayward and said he regretted using the word “shakedown.” He was not entirely convincing.

  2. 2
    zman Says:

    Max pain


    HAL $26
    BP $34

  3. 3
    VTZ Says:

    Gold blastoff.

  4. 4
    VTZ Says:

    Equities and silver likely to play catchup to bullion.

  5. 5
    BirdsofpreyRcool Says:

    Cooling off day for credit… which has been on a TEAR lately. TED looking just a tad calmer today (so far). However, not showing any additional signs of worry this morning. Will probably follow stocks.

    IG +1 1/8 bps wider

    HY -3/32 pt lower

    TED +44.4 bps

    [Note to self — try not to trade on option expiry day, it never works well for you.]

  6. 6
    zman Says:

    BOP – thanks. Hear ya on your last, going to be closing a position or two but not opening today most likely. Too random, especially in the summer.

  7. 7
    BirdsofpreyRcool Says:

    HeadTrader thinking today will be flat and ho-hum. Points out that overseas were mostly flat and that soccer at 10am and golf at 1pm will pretty much tie up the day. He suggests I take a long nap here.

  8. 8
    BirdsofpreyRcool Says:

    z — you are so much the better trader than i am, honestly, that comment was directed to myself.

  9. 9
    BirdsofpreyRcool Says:

    it’s Friday… so OT…

    wcoaster — KUDOS on your SMOD pick. They whalloped the ball outta the part y’day. You’re GOOD, girl.

  10. 10
    BirdsofpreyRcool Says:

    who here follows LEI? Is it all just the KKR/Hilcorp valuation driving the stock?? or, something else….

  11. 11
    BirdsofpreyRcool Says:

    ok… one last shout out then i will shut up…

    crysball — nice going on EGY. Their SE Etame may not have been the double-horizon discovery they were hoping for, but they found something… and maybe even an economic something. And they did it on time and on budget. Gotta appreciate execution these days. EGY has been pulling off some nice drilling lately… with more to come.

  12. 12
    BirdsofpreyRcool Says:

    said i would shut up… but, technically, this isn’t my comment…

    XACS#1 is growing horns — read all about it


  13. 13
    zman Says:

    If you work for Schumberger please contact me at zmanalpha@gmail.com as soon as possible.

  14. 14
    tomdavis12 Says:

    Z: Did you see the reason for Goldman’s love for NFX?

  15. 15
    zman Says:

    Tom – No. But I’m not surprised to see them cut the other two names, probably just generating commissions on a triple witch Friday. Irritating how they deliberately try to push names around at their most pushable times. Flipside is, I like both names so sink them for a day or two for all I care.

  16. 16
    BirdsofpreyRcool Says:

    TomDavis — you long NFX? Was talking to some old-timers the other day… they were in NFX’s offices recently. They were spouting LOVE too. Called the mgntm team “among the best in the biz.”

  17. 17
    VTZ Says:

    XACS lost me at fundamentally bullish in the first line.

  18. 18
    AAA Says:


    Interesting piece by XACS. He’s been pretty spot on, and I get the linkage, but if credit(and the euro) is improving because of a slowing US economy, I have trouble seeing that as bullish for equities.

  19. 19
    zman Says:

    Speaking of spot on, Nicky, any thoughts? Other than the U.S. is going to school Slovenia?

  20. 20
    apbd Says:

    BOP and JB. Into more CIGX today.
    Thanks and voted.

  21. 21
    zman Says:

    Watching HAL closely for an exit on the remaining June $26s.

  22. 22
    zman Says:

    If your are bored and feeling like a good guy or gal, you can “follow me” over here:


    It makes you feel good about yourself, burns calories, and keeps costs around here down. Thanks.

  23. 23
    BirdsofpreyRcool Says:

    apbd — the Roskamp Institute connection is the best piece of outside “evidence” that there is “something” to Star’s products. I’ve tried it…. and can hardly wait until they are available in the market. That said, my stock price caveat holds…. until the actual product launch, CIGX is a bloody battleground between longs and shorts. The largest institutional holder can not buy or sell their shares (due to reporting status and lock-up agreements). So, the stock price could do almost anything on any day. That said, I really like the long-term outlook here… and the potential market is Scary-Huge.

  24. 24
    VTZ Says:

    Uh oh USA!?

  25. 25
    zman Says:

    Do you guys like those IPO briefs and is there anything you’d want to see added to them.

    SVN 1, US 0. Uh oh.

  26. 26
    BirdsofpreyRcool Says:

    z — IPO briefs GOOD. Especially now that we are getting IPOs back. Thank YOU.

  27. 27
    BirdsofpreyRcool Says:

    Starting to see the credit market pick up momentum to the up (positive) side… wild stuff. Bears have got to be getting sweaty paws here.

  28. 28
    Jerome Blank Says:

    Re: #20, apbd, thank you for the vote….

  29. 29
    BirdsofpreyRcool Says:

    IG index now -1 1/8 bps tighter… albeit on light volumes.

  30. 30
    zman Says:

    BOP – that model is pretty basic but should do in a pinch.

    I modeled the IPs at 1,200 boepd which they should be able to do given where they are drilling
    30, 60, 90 day rates are a combo of BEXP and WLL historic declines. Should be conservative. I put in 7 wells a quarter and then decline those wells at the appropriate rates plus declined the 1Q base production at a slow level. On oil prices I took $10 off where I think WTI will be. On natural gas I have no idea how they scored $7 gas in 1Q (nothing in the notes on it) but I didn’t give them a premium to nymex like that going forward. Costs are modest per BOE rate declines all year. If they turn in more BEXP and WLL initial rate wells they could do EBITDA closer to $80mm this year. It will be interesting to see their first report as a public company of the 4 wells drilling now and to see the models from the underwriters in a month. I could be pretty far off base but I suspect I’ll be low to those models.

  31. 31
    AAA Says:

    More good news for BP department:

    By Jilian Mincer
    New York state’s pension fund is considering suing BP PLC for its management of the well in the Gulf of Mexico that’s been spewing oil for the past two months, a spokesman said.

    The New York State Common Retirement Fund, with $132.6 billion in assets, owns 17.5 million BP shares through index funds.

    “We’ve been looking at all our options that we have available, including potential litigation,” said Robert Whalen, a spokesman for the fund. “We want to make sure if there was negligence or recklessness that we are made whole appropriately,” he added.

    BP spokesman Robert Wine said he was unaware of any potential litigation and had no immediate comment.

    A lawsuit from one of the largest pension funds in the country would add to the pressures BP is facing. It’s already spent nearly $2 billion in the spill response and faces billions more in costs related to plugging the leak, clean-up, fines and potential litigation. It’s under criminal investigation by the U.S. government and at least three lawsuits have been filed on behalf of the company’s shareholders in recent weeks in state courts, according to lawyers.


  32. 32
    tomdavis12 Says:

    BOP 16 NFX has been acting very well of late. Would not be surprised to see GS taking some off the table today.

  33. 33
    BirdsofpreyRcool Says:

    z — #30 thank you for the follow up. Hearing the completion crews are the holdup in the Bakken… so, you have a good level of confidence they can complete 7 wells/qtr? How many rigs they running? thx.

  34. 34
    BirdsofpreyRcool Says:

    #32 thank you, TD.

  35. 35
    crysball Says:

    EGY has 18.1 million of PUD reserves in their North Tschibala field which is situated immediately adjacent to the SE Etame Vertical exploration well.
    The N. Tchibala filed has 3 old vertical wells into the Dentale Sands (drilled back in the 70’s & 80’s by other)s but never prodcued. They also have a pipepline to their FPSO running right through the middle of the N. Tschibala field.
    It wond take much of a reservoir on the SE Etame to justify their building a production platform and producing both N. Tschibla, and SE Etame. The SE Etame well (if produced) effectively derisks the N. Tchibala field. My best estimate a single platform producing N. Tchibala & SE Etame filed will add 8,000 to 10,000 b/d to production, but SE Etame production decision is dependent upon sidetrick currently being drilled (22 days).

    Am also expecting catalyst news on two other fronts:
    ~JV announcement on the Mutama Iroru on shore Gabon field [EGY has 100% WI]
    ~COO and Chief Exploration officer are both back in Angola this week [2nd trip this monthy] trying to get Somongal moving on EGY’s block 5 concession [they have 3 exploration wells planned for 2011].

    Vaalco has $105+ milllion in cash, ZERO debt, is profitble, and grossly undervalued IMHO.

    Their business model remains to walk behind the majors and pick up their expired concessions, and using the their data (+some of their own seismic).

    Revenues are 99% oil, and current revenues are from shallow offshore wells (7 producing) in oil frienly Gabon. Vaalco operates all their own wells, Current production is 23,300+ b/d of which they have a 30.1% WI.

    Their day will come either by recognition of their #’s or buyout by the Chinese or Indians.

  36. 36
    zman Says:

    BOP – 4 rigs, 2 in Sanish and 2 to the west in what BEXP calls Rough Rider.

    Can they do it? Don’t know. The spud to TD time is not the issue, you pegged it on the crews. They put 7 on in the first five months of the year on a lower budget, so I’ve giving them the benefit of the doubt. Also, they were over 4,000 boepd in April which suggests my 2Q number is probably safe at only 4,260 boepd (they also had a couple more waiting on completion at May 31). I’ll hone it as soon as I get a better read on timing but I think I played it safe enough on the rates that if they do 5 a quarter instead of 7 it will be a wash.

    HAL trying to help me out again.
    BP acting like it wants to go but not yet.

  37. 37
    BirdsofpreyRcool Says:

    crysball — if you don’t mind, could you keep us up to date on EGY? Very very helpful.

    I know a that various entitities have made a run at EGY a coupla times.

    One of their strengths (in Gabon, at least) is that mngmt knows how to operate there. EGY is the only US company to have an office in Gabon… makes a difference.

    As far as Angola goes… would not be surprised to see the concession lapse and EGY lose their #10mm escrow money. EGY doesn’t think that will happen… but it’s so tough to work with a bureaucracy on a timeline. So, i’m giving Angola zero value (just to be conservative).

    As far as the on-shore Gabon concession, I would think we could hear any day about a partner there. Hearing that several partners were suggesting they forgo the seismic expense and use partner capital to just jump in and drill 2 wells (using some old but reprocessed seismic). I like that, if it happens.

    Don’t thin EGY wants to get above 25k bo/d on the offshore Gabon stuff (requires another FPSO and higher taxes to govt), but it is a nice, juicy Cash Cow for EGY… with a tasty pile of reserves.

    Key question will be — what do you do with the cash, boys? But happily, they don’t seem to be willing to overpay to jump into anything.

    I think the Pres/COO at EGY rocks, by the way.

  38. 38
    zman Says:

    Actually the S&P jumping up sharply, any news?

  39. 39
    BirdsofpreyRcool Says:

    Credit trying to make a breakout run… on top of all the breakout runs the last week. I think Bears with Sweaty Paws may be part of the answer.

    But, it ain’t an Easy Up from here. Need some better eco-news (and for FinReg to get further modified). JMHO.

  40. 40
    zman Says:

    Slovenia with 2. Ugh.

  41. 41
    VTZ Says:

    Game over maybe.

  42. 42
    RMD Says:

    LEI: some comments from recent meeting with another co. (new source to me so I can not “grade it now). EFS as it trends north-northeast gets shaly into Lavaca and Gonzales, where the lower Austin Chalk tends to run into the EFS. They are skeptical about this part of the play, and think many of the new players here are just playing “trendology”. I have no opinion, just passing it along.

  43. 43
    zman Says:

    Reef, if you are around, any thoughts on 42?

  44. 44
    RMD Says:

    GHS does calculation on YTD month-end prices and 2H10 strip prices for yearend ’10 reserve calculations:
    1H09 – 1H10 $49.46 4.16- 79.71 4.77
    2H09 – 2H10 72.71 3.56- 79.10 5.34
    YR 61.08 3.86- 79.41 5.06
    Reserve calculations will be higher in 12/10.

  45. 45
    crysball Says:

    Re EGY going above 25,000 b/d of oil to the FPSO.

    The royalty rate to the Gabon Gov’t goes up if the Etame concession produces more than 25,000 b/d.

    Timworth operates the 1.1 million barrel FPSO [Petrole Natupia] for Vaalco in Gabon, and it is currently limited to 30,000 b/d of totla fluids and 25,000 b/d of oil, however their is room on deck to add more fluid/oil processing capacity. Howevery the current lease expires in 2015 and they would have to capitalize the decktop improvements over that period.

    My previous discussions with mgmt. led me to beleive if they could achieve 8,000 to 10,000 more b/d and sustain it, the IRR would favor them increasing production above 25,000.

    Vaalco has plenty more drilling prospects in the Etame Concession
    Mgmt. has sold Vaalco as a growth company and needs to deliver on that promise…..not just talk about it.

    Vaalco has at least one more Horizontal development well to drill in the current Etame program…..ET-7H which is a redrill of the old ET-1V well. The ET-1V well is a waxed up vertical well currently down to 800 b/d , when redrilled as a Horizontal [Open Hole gravel packed….no Frac required], it is estimated to produce approx 3,000 b/d or a net increase of 2,200 b/d……..which takes them to 25,000 b/d.

    If SE Etame is successful it will take 18 months to desing build, install a new production platform.

  46. 46
    BirdsofpreyRcool Says:

    ha! Credit going all “hair’s on fire” (to borrow a ram-phrase).

    IG -3 1/8 bp ==> en fuego (good)

    HY + 13/16 pts

    This are particulary strong moves b/c they are coming on the back of strong moves the last few days. Bears Beware.

  47. 47
    BirdsofpreyRcool Says:

    crysball — You are now crowned King of Vaalco. Please keep your serfs (like me) fully informed. Thank you!

  48. 48
    TEXWS6 Says:

    Re #42:

    People are keeping things VERY quiet on their EFS activity and well production.

  49. 49
    BirdsofpreyRcool Says:

    E21 = pinned at 17-fiddy, it seems… works for me…. for now.

    Once we regain some multiple in the GoM kids, E21 should go back to $22 based on current production (giving no nod to DavyJones). But need to see the BP disaster plugged before people will be willing to go back into the water, methinks.

  50. 50
    VTZ Says:

    Donovan is elite.

  51. 51
    BirdsofpreyRcool Says:

    TEX — you in LEI?

  52. 52
    BirdsofpreyRcool Says:

    RMD #42 — thank you!

  53. 53
    elduque Says:

    Bill- thanks for the help with SD/ARD.

  54. 54
    BirdsofpreyRcool Says:

    On E21 — here are the data… you can pick your fave EBITDA multiple and do your own evaluation.

    FY 2011 estimates
    EBITDA $400 to $440mm (Duane has $435mm)
    LT Debt $754mm
    Asset retirements $167mm
    Total cash $125mm
    Capex $250-300mm
    FCF $100mm
    Fully-diluted shares o/s 60.5mm **

    (** treats convertible preferreds on an “as converted” basis, b/c can force conversion at $17.50/share)

  55. 55
    zman Says:

    Crude actually higher on the day, up 50 cents from down over a dollar earlier … at the whim of the S&P at the moment.

    AEZ getting a nice boost, most fo the rest of my stuff flattish and boring looking today.

  56. 56
    zman Says:

    V – Not so fast my friend. Slovenia 2, USA 1.

  57. 57
    tomdavis12 Says:

    Z: One comment I have been meaning to make is that I love your WIOWIO. This the type of solid analysis that you look to get from sell side analysts that does NOT exist anymore. Z take a bow and keep up the good work.

  58. 58
    guru Says:


    I agree with you that the metrics on E21 look very good.

    What do you think are the prospects of cos with limited resources (e.g APC, E21 or MMR) if the Congress, in their narrow focused wisdom, implements unlimited liability caps. There is a lot of talk that limits would be lifted for both deep water and shallow water operators.

  59. 59
    zman Says:

    Tom – stop it. And there are lots of good analysts out there. I just don’t get their research most of the time. I do get tired of all the cookie cutter first call notes though, 2 days late and often several dollars short.

  60. 60
    VTZ Says:


  61. 61
    DrLink Says:


  62. 62
    zman Says:

    Slovenia 2, U.S. 2 … don’t call it a comeback!

  63. 63
    VTZ Says:

    oh man

  64. 64
    zman Says:

    Dude, that was not offsides!

  65. 65
    BirdsofpreyRcool Says:

    guru — thx for asking. APC pretty big… so wouldn’t throw them into the same bucket as E21 and MMR.

    Removing the liability cap is just stupid. It would kill all the but very largest operators in the GoM. It also punishes the hundreds of companies that have been operating in the GoM for decades that have NOT spilled oil. It would be a Stupid Move of the First Degree. I have to believe the even This Congress will not go that far. Too many “jobs lost,” for one.

    But that is the Number One risk to the GoM players right now. Stupid Congressional Pet Tricks. ugh.

    There IS money in the pot (or supposed to be) for spills, paid for by the companies themselves in various fees and lease expenses. The BP spill was a one-off. I don’t think we will see that again for another 20-30 yrs.

    At some point, common sense has to prevail (I hope). After all, when a plane crashes (and please, God, don’t ever let a plane crash again… but just using this as an example), the Govt doesn’t shut down all the airports and then just let the Big Airliners fly. I think Common Sense will prevail. (Fingers XXd)

  66. 66
    BirdsofpreyRcool Says:

    Also, hearing that a couple of the largest holders of E21 (including MSD, who sold some shares at the peak, a while back) have been buying. So, I’m not alone in thinking that Congress will not do anything to further kill the economies/jobs/tax base of the GoM operators and states.

  67. 67
    VTZ Says:

    US/England need to be soccer allies now. Better lay off the BP nonsense!

  68. 68
    zman Says:

    2-2, U.S. got robbed on that offsides call.

    Market should feel free to rally now.

    Watching the HAL $26s for a last minute exit here.

  69. 69
    VTZ Says:

    It was a foul not offside. I think the ref called the US player who pulled the defenseman down in front, but it was a weak call away from the ball. That sort of stuff goes on all the time. The ref was calling the game quite tightly though, in his defense.

  70. 70
    zman Says:

    V – ah, OK, saw the offside banner at the top of my screen but had the sound down.

  71. 71
    guru Says:


    Agree with you 100%. Let us hope that Congress does not enact such a stupid unlimited liability legislation. Such a misstep will wipe out the entire midcap E&P offshore exploration.

  72. 72
    zman Says:

    Pinning action setting in with a bit of an upward bias so far.

    BP rumored to be looking at a $4 to $5 billion bond issue next week. Probably a good idea if the rating agencies are going to cut them further in the near term.

  73. 73
    ftc88 Says:

    Z – what’s your take on BEXP being able to take out the old high of 21+ after announcing the four wells? Thanks.

  74. 74
    ftc88 Says:

    BOP – CIGX. Did you see where Cigx’s narketing company inVentiv Health agreed on May 6 to be bought out by Thomas H. Lee Patrners, a private equity firm. Maybe that delayed the CIGX launch.

  75. 75
    zman Says:


    Sold the (40) HAL June $26 calls for $0.85, up 7%. I continue to hold the July calls here.

  76. 76
    zman Says:

    OAS getting a little follow on move today, nothing exciting but better than a poke in the eye with a sharp stick.

  77. 77
    BirdsofpreyRcool Says:

    ftc — yes. inVentive put themselves up for sale a while back… stock saw a nice jump on that. Have asked and been told that the sale did not affect the launch at all.

    This is one of the biggest things inVentive has has ever done. They are handling all parts of the smoking cessation product launch here. As such, they are competing with some of their customers. So inVentive set up a subsidary just to handle the CigRx product. THAT is why it took so long (since it was announced last November or so) to finalize the inVentive contract. But that was done back in March (if i recall correctly). The one month hold up (from June to July) was due to last minute changes in packaging, I was told. They want to make 1,000 times sure CigRx packaging says nothing that will cause an eyebrow to raise at the FDA.

    Week of July 12th, I’m told.

  78. 78
    BirdsofpreyRcool Says:

    Goldman-Backed Cobalt a Target After BP Oil Spill (Update1)
    2010-06-18 08:19:51.143 GMT

    By Zachary R. Mider and James Paton
    June 18 (Bloomberg) — Five years ago, investors including Goldman Sachs Group Inc. and Carlyle Group put up $500 million in seed money to hunt for oil in the deep waters of the Gulf of Mexico and elsewhere.
    After the BP Plc oil spill, smaller Gulf operators such as the Goldman startup, Cobalt International Energy Inc., may be swept up in a wave of consolidation as the regulatory landscape tilts in favor of larger firms, said William Herbert, an analyst at Houston-based Simmons & Co.
    Tougher rules are likely to boost costs and slow the pace of drilling, said Scott Van Bergh, co-head of Americas energy and power investment banking at Bank of America Corp.
    Companies may also face higher liability caps and requirements to post some clean-up costs in advance. That may make drilling in the Gulf feasible for only the world’s largest energy companies, including Exxon Mobil Corp., Total SA, Petroleo Brasileiro SA, Norway’s Statoil ASA and Australian miner BHP Billiton Ltd.
    The rules Congress enacts “are likely to favor larger operators over smaller ones,” Van Bergh said. “People are thinking about who will want to exit, and who will want to become consolidators.”

    BHP Firepower

    Cobalt, founded in Houston in 2005 by the former president of Unocal Corp., Joseph Bryant, operates in the deep waters of the Gulf and the West African coast and went public last year. The shares lost about 44 percent since the spill on April 20, giving Cobalt a market value of about $2.8 billion.
    Houston-based Plains Exploration & Production Co., with a market value of about $3.3 billion, and Cobalt may be targets for BHP, the world’s largest mining company, according to a report last month by Deutsche Bank AG analysts.
    BHP already has four operating energy projects in the Gulf, three of which are joint ventures with BP. The Melbourne-based company has the “firepower to do enormous things,” J. Michael Yeager, the chief executive officer of BHP’s petroleum unit, said on a May 24 conference call.
    BHP is capable of spending as much as $20 billion to acquire Gulf assets, including BP project stakes that may come up for sale, Citigroup Inc. Sydney-based analyst Clarke Wilkins said in an interview today.

    ‘Public Enemy’

    “BP is public enemy number one in the U.S. at the moment, and if there is any forced divestment of assets, BHP is in a strong position to be able to pick them up,” Wilkins said.
    BHP, a partner with BP in the Atlantis, Mad Dog and Gunflint ventures, may increase its stakes in those projects, he said. BP’s share of those assets is worth $11 billion, Wilkins estimated in a June 16 report.
    Amanda Buckley, a spokeswoman for BHP, said the company doesn’t comment on speculation. Cobalt spokesman Rich Smith didn’t return a call seeking comment. Andrea Raphael of Goldman Sachs declined to comment, as did a spokesman for Riverstone Holdings LLC, which sponsors a fund with Carlyle that invested in Cobalt. Spokespeople for Plains didn’t return calls.
    The oil and gas business is one of the busier sectors in a slumping merger market this year, accounting for $68.8 billion of deals, or about 8.4 percent of the total across all industries, according to data compiled by Bloomberg. Oil and gas deals accounted for 5.9 percent of global takeovers during the previous decade.

    ‘Buoyant Market’

    Energy mergers and acquisitions may produce a “buoyant market” in 2010, according to Wood Mackenzie Consultants Ltd.
    Still, it may be months or years before Gulf players get a clear enough understanding of the new regulatory environment to do deals, said Bank of America’s Van Bergh.
    The U.S. Justice Department has begun a probe into the BP oil leak, and President Barack Obama put a six-month ban on offshore drilling. Congress is also considering removing the $75 million limit on economic losses from oil spills that large companies must pay. BP agreed this week to set up a $20 billion fund to pay victims and the spill had cost it more than $1.2 billion as of June 11.
    “Costs will go up to operate in the region and that could make it quite difficult for smaller companies,” said Peter Chilton, an investment analyst at Sydney-based Constellation Capital Management Ltd.

    Anadarko, Noble

    The changing economics of deep-water drilling have prompted investor doubts about one $2.7 billion deal struck just before the spill. Mariner Energy Inc. shares dropped about 7.7 percent since the spill amid concern an agreed sale to Apache Corp. may unravel. Apache is committed to completing the deal and expects to do so after getting regulatory and shareholder approval, probably in the third quarter, said spokesman Bill Mintz.
    It’s too early to say how the BP spill will affect Total’s plans for exploration, said Phenelope Semavoine, a spokeswoman for Total in Paris. Alan Jeffers of Exxon Mobil and Paula Almada of Petrobras declined to comment. Ola Morten Aanestad, a Statoil spokesman, didn’t return a call for comment.
    “Today the industry is focused very much on the spill itself, but we believe that many are thinking about what the longer-term implications will be as an operator in the deep- water Gulf,” said Bank of America’s Van Bergh.

    Anadarko, Noble

    Anadarko Petroleum Corp. and Noble Energy Inc. are among companies that may opt to sell their deep-water Gulf assets, according to Simmons’s Herbert. Anadarko, which owns a stake in BP’s leaking well, has dropped 43 percent since the spill.
    Houston-based Noble, which got about 10 percent of 2009 production from the deep-water Gulf, is down 15 percent.
    Anadarko said on June 3 it may shift capital spending to projects outside the Gulf. The Woodlands, Texas-based company got about a fourth of its production from the Gulf in 2009, according to a regulatory filing. Spokesmen for Anadarko and Noble declined to comment.
    “The risk premium for deep-water, highly pressured reserves has gone up,” Herbert said. “It’s not a seller’s market.”

  79. 79
    zman Says:

    HAL continues to look very strong, just wanted to be out of the June since they have 0 time left. Grabbing lunch, may add more HAL on Monday.

  80. 80
    bill Says:

    this story needs to be told


  81. 81
    bill Says:

    how some in govt spend money

    this crap is making me sick


  82. 82
    jat Says:

    thought some might find this interesting:


  83. 83
    zman Says:

    Re 80. Gee, I’m so disillusioned. After watching the congressional testimony yesterday I was under the impression that the government was not to blame or at fault in this in any way.

  84. 84
    VTZ Says:

    A weekly pit close around these levels in gold is going to mean short term upside to 1300-1350 in my opinion because of all the recent consolidation which was preceded by even longer, deeper consolidation before.

  85. 85
    TEXWS6 Says:

    BOP, LEI?

  86. 86
    BirdsofpreyRcool Says:

    TEX re #48… just wondered if you owned LEI…

  87. 87
    RMD Says:

    I u/s HBO is airing “Gasland” on Monday night which goes into how fracing pollutes the water supply. (Once you know the subject you can probably write the script.)

  88. 88
    BirdsofpreyRcool Says:

    CIGX — shorts have taken the field. Nothing has changed here, the bloody battle continues until the cavalry (inVentive launch) arrives.

  89. 89
    BirdsofpreyRcool Says:

    RMD — #87 that stuff gets launched with great fanfare… then pulled yrs later with nary a whimper or a backward glance… ugh.


  90. 90
    BirdsofpreyRcool Says:

    CIGX has $1.50 and 2.00 strikes… looks like a Push-me-Pull-you contest going on today.

  91. 91
    TEXWS6 Says:

    Re Gasland,

    Not gonna be good for the home team. I heard it’s gonna bash HAL, Dick Cheney, and ECA.

  92. 92
    zman Says:

    Rig Count Watch

    Oil up 13, NG down 1

  93. 93
    zman Says:

    BP siphoned 25,000 bopd on Thursday.

  94. 94
    milepost_43 Says:

    BP Hayward demoted…
    A day after he was grilled by Congress, BP chief executive Tony Hayward is being demoted. According to Britain’s Sky News, BP Managing Director Bob Dudley will take over day-to-day oversight of the Gulf of Mexico oil spill while BP’s chairman Carl-Henric Svanberg (he of the “small people” comment) will assume major PR duties. (Yes, you read that right—the BP executive who famously expressed his compassion for “the small people” will be tasked with enhancing the company’s public image.)

    The main reason for the shift is plain enough for anyone who’s been following the spill: BP executives acknowledge Hayward has blown it as the company’s face during the crisis. Svanberg, while defending the BP CEO, acknowledged the Hayward’s comments have not been helpful to the company’s efforts to control fallout from the disaster.

    “It is clear Tony has made remarks that have upset people,” Svanberg tells Sky News. “This has now turned into a reputation matter, financial and political and that is why you will now see more of me.”

  95. 95
    Dman Says:

    #94 Wow, they really move fast don’t they. Really nipped that one in the bud.


  96. 96
    Dman Says:

    At least a month ago, Hayward shoulda been told: “look you can stay on, but at some point we’ll probably have to use you as a containment boom”

  97. 97
    ftc88 Says:

    Z -re 73 in case you didn’t see it.

  98. 98
    crysball Says:

    Re LEI:
    Has moved from $2 to $3 in one week.
    Several major positive catalyst events in the next couple of weeks for lLEI:

    1)Annual 10K and resrve report for year ending 3/31/10

    2) Annoncement of the comencement of drilling operations on the initial Eagle Ford Shale JV well

    3) Announcemnet of completion of the 2nd portion of the Eagle Ford JV agreement with Hilcorp (which in turn has announced a $400 million JV with KKR on the Eagleford Assets).

    4) Results from the operations of the five workover and completion rigs LEI currently has operating

    Full discolsure, have been in LEI for approx. 1 month & SSN for 6 weeks.

    As someone may have pointed out both LEI and SSN have refined the art of AMBIGUOUS news releases to a NEW ART FORM!

  99. 99
    Jerome Blank Says:

    CIGX 30 min added…
    OAS 5 min added…

  100. 100
    BirdsofpreyRcool Says:

    JB — voted. Thank you.

  101. 101
    reefguy Says:

    42….LEI is not correct…ask CHK, APA, and others

  102. 102
    Dman Says:

    V – what happened to the manipulators? Didn’t even make an effort at the close.

  103. 103
    baylor3217 Says:

    Thoughts on where KOG has run to? I’ve picked up a decent 33% profit here in the last 3 weeks or so and trying to determine if I should take profits.

  104. 104
    Jerome Blank Says:

    RE: #100 BOP thank you much, CIGX…seems like a good add spot on the 30 min, vol on the pullback has been very light…

  105. 105
    BirdsofpreyRcool Says:

    baylor — i sold my KOG trading shares for a somewhat less than 20% short-term profit. 33% is HUGE (for a non-option position). You know what i say… take profits when you get them!

  106. 106
    BirdsofpreyRcool Says:

    crysball #98 — OK… now you’re crowned King of LEI too. LOVED your post (esp the last comment… lol)

  107. 107
    baylor3217 Says:

    no one ever got hurt taking a profit

  108. 108
    BirdsofpreyRcool Says:

    P.s. Still hold some long-term KOG shares, tho. Just sold my “trading” shares that I bought with DrLink.

  109. 109
    Jerome Blank Says:

    KOG…I’m holding for new highs, if you look at the weekly chart…KOG is testing very long term resistance, if KOG cycles to the lower trendline I plan to add…

  110. 110
    milepost_43 Says:

    Oil Spill fallout….being ex-pipeliner have GOOG alert for Keystone XL pipeline from CAN to Hou/Pt Arthur….amazing the number of alerts since GOM oil spill with following “theme”..

    Don’t let Big Oil cut corners on safety
    by: Texas Sierra Club
    Fri Jun 18, 2010 at 00:28 PM CDT
    BP has a long history of cutting corners and ignoring basic safety guidelines, and now the survivors of the Deepwater Horizon explosion are publicly confirming that BP ordered shortcuts on the day of the blast.
    On a related matter, BP and the other oil companies are now proposing that tar sands oil production can help replace dangerous offshore drilling. This is a giant step in the wrong direction. The proposed Keystone XL pipeline would carry toxic tar sands oil across the Ogallala Aquifer and 32 Texas rivers and streams. Given the gulf oil disaster, can we really trust BP and the big oil companies when they claim that tar sands oil spills are unlikely?

    …and as was mentioned earlier we have the HBO “fire water” Mon…all in the O&G industry better hope another major spill/fire/etc doesn’t happen any time soon….

  111. 111
    zman Says:

    Re 73. Probably not from the 4 wells that we should hear about any day now. Bigger news will be the two wells after that (Montana and 1 in RR that is their first TFS well). Seems like the name is coiling up for that.

    Thanks JB

  112. 112
    choices Says:

    BEXP not doing so well since OAS came out-waiting for catalysts.

  113. 113
    Dman Says:

    #111 Glad to hear it’s coiling up. Here I was thinking it was just annoying the hell out of me for no reason 🙂

  114. 114
    Jerome Blank Says:

    Exxi…pressing P&F trendline resistance, breaks out on the current buy signal at $18….

  115. 115
    ftc88 Says:

    Max pain for BEXP is 15. So they got it down 1.29 since Tuesday. Guess that’s better than the full $4. 18 minutes to go.

  116. 116
    pwdrhound Says:

    Big moves in PQ lately. Up about $2.40 since June 1st. Mainly due to joint venture announcment or new rig?

  117. 117
    VTZ Says:

    RE 102 – I guarantee they were trying… probably too much buying support.

  118. 118
    BirdsofpreyRcool Says:

    thank you for the EXXI update, JB

  119. 119
    zman Says:

    BEXP – as far as the stock, the action is just noise in my book. As far as options go, I generally like buying it after dips. Montana is key for the next leg. I fully expect a good well out of the TFS in Rough Rider so less of a pop on that being good. On the day to day wells, they’ve set the bar and aren’t getting a lot of bang (any bang) for the recent announcements. Quarterly results should be at least at expectations though.

    PQ – eye off ball there at the moment, hadn’t really tracked that move.

  120. 120
    zman Says:


  121. 121
    crysball Says:

    Anyone tracking…….selling off?

  122. 122
    baylor3217 Says:

    What are the thoughts on the board of BP moving forward?

    I’ve never made a leap trade that has worked (probably only done it 3 times), but it seems there may be an opportunity here. Is Obama going to put the screws to one of his biggest donors? Will they go the way of letter C where people were saying it was the buy of a lifetime at $20 and it proceeded to go to $0.98?

  123. 123
    zman Says:

    Baylor – good question. I’ve taken a number of pokes at that so I’ll let someone else answer.

    Check out the odd, telephone pole of a minute chart on OAS, closed the day up 6% with some decent end of day volume to boot.

  124. 124
    Hoss Says:

    RE OAS

    Within the BEXP Presentation you can get a feel for some of the OAS well locations and the start of a potential catalyst list for OAS on pages 15 and 16. These would be OAS operated wells. OAS has various working interests in plenty of non-operated wells too, but the interest varies amongst the West Williston, East Nesson, and Sanish plays. For example, their smallest acreage position(44,031 gross – 8,747 net acres) and working interest(average working interest of 8% ) is in the Sanish, but you could argue it will produce the best EUR’s.

    OAS S-1
    “Our properties in the Sanish project area are entirely operated by other operators, the largest of which are Whiting Petroleum and Fidelity Exploration and Production Company(MDU Resources).”


  125. 125
    zman Says:

    Hoss – yeah, I’ve been looking at those and the ND confidential well list. My numbers for their incremental well ads are likely to be low. My model is net wells drilled and gives them no adds for the non-operated program, just to keep it conservative/simple.

  126. 126
    zman Says:

    And yeah, you can bet OAS is going to get an section on the catalyst list although it won’t have options for several months and may prove to be thin after the IPO flip volumes die down.

  127. 127
    Hoss Says:

    For month of April from NDIC – Only (4) operated wells off-confidential out of a total of 43 – and those are gross – producing above an average of 100 Bopd did not inspire confidence, but that is looking in rearview mirror.

    Montana did impress either. For month of April (28) operated wells all producing less than average of 50 Bopd. Again, that is looking backwards.

    However, you should know I have a habit of missing the forest through the trees.

  128. 128
    zman Says:

    Hoss – Thanks. Do you have IPs on those and IP dates? Can you send the link to what your are looking at? Thanks again.

  129. 129
    Hoss Says:

    Z I have basic service(fee) with NDIC and used public access to Montana.

    I just grabbed April data and put it in a spreadsheet for a quick look. This weekend, I was going to go back through and grab the IP’s and cumulatives but haven’t done it yet.

    I can send you what I have in exel, but it is pretty raw.

  130. 130
    zman Says:

    Hoss – thanks, didn’t see they had a pay service, will subscribe next week, as I bet their office will be shut by the time I could find a fax machine. Sheesh, so 20th century.

  131. 131
    Hoss Says:

    There’s a premium version at NDIC, but I don’t know the value add there. It’s a slog to get through the NDIC data. Montana production by operator relatively easy to retrieve. Wyoming does best job of all – very easy to get comprehensive production data by operator with granularity on indivdual wells.
    North Dakota
    Montana – Oil&Gas link in title bar – not working currently

    You might ask West for some more color, He’s very dialed into the Bakken.

  132. 132
    zman Says:

    Yeah, I use the GIS mapserver all the time to find wells and the confidential list. Going to get their basic pay service next week, that’s a bargain.

  133. 133
    Hoss Says:

    Thanks and have a good weekend Z – it’s Blind Pig thirty for me… an excellent IPA from Russian River Brewery – if you can find it.

  134. 134
    West Says:

    KOG..DVN to drill horizontal to test lower Cretaeous 3 different zones in southwestern WY. Offset to vertical that has produced o&g and is shut in presently. AEZ..Williams Co now one of the most active counties in North Dakota with 21 rigs running , exploring for both Bakken and 3Forks. I’m not saying that this is the value of AEZ’s acreage but at the last ND o&g lease sale the average price per acre was $ 3,800. Should be fracing 4th well next week, 2 rigs running with plenty of room to run. Drilling longer laterals now with anticipated 30 stage frac. Looks like it could run here with a good completion and IP……..MHR price easily moved by either buying or selling. Looking for EFS well shortly, which would be cataylst for a a big up move with positive results.They are budgeting 56% of theircapex to the EFS so they think they have something. Their company results are steadily improving with workovers and delayed work that is now being done on Triad Hunter properties……SD action this morning seems like covering. Looking for at least a 15% price move by the end of July no matter the outcome of the merger. They have 14 rigs on exForest property each and completing 4 wells a month with low end estimated production of 10 boepd ( probably more like 20 with 25% 1st year decline curve). Starts to add up quickly and they are close enough to hook up to Aspen pipeline that sells low quality gas to electric generator in Odessa, probably $2.00 pmcf but better than flaring……………BEXP, they are right in the heart of all the Williston Basin action but stock is not acting right to me. Another big red day and can load up on July calls for upcoming news…………..XEC, put your parents in this on any pullback

  135. 135
    BirdsofpreyRcool Says:

    APC Watch — yikes! Moody’s slaps ’em upside the head in a pre-emptive and Friday downgrade to JUNK status (from the lowest tier of investment grade, Baa3 –> Ba1). OUCH. The downgrade affects $12.9B of debt securities outstanding.

    Moody’s then adds insult to injury by stating that there could be further downgrades on the way. If any investment grade corporate bond fund still owns APC debt, they will be spewing paper on Monday morning. Fugly stuff.

    Kinda sucks. The only “winners” here will be the lawyers.

  136. 136
    PackMan Says:

    The Economist: “Vladimir Obama”


  137. 137
    Dman Says:

    I meant to mention this ages ago for anyone who uses margin. As well as absurdly low commissions and a platform that I now can’t live without, IB also has phenomenally low margin rates:


  138. 138
    zman Says:

    TAT on the tape with selling shareholder filing.

    Thanks West.

    135 – Ouch. Sounds like the rating agency thinks they will have to pay it, not that that means they will.

  139. 139
    zman Says:

    APC’s Response to BP:

    HOUSTON (AP) — Anadarko Petroleum Corp., which owns a quarter of BP PLC’s blown-out oil well in the Gulf of Mexico, late Friday blasted BP “reckless decisions and actions” that led to the well’s explosion.

    Anadarko Chairman and CEO Jim Hackett’s statement came after some elected officials said Anadarko should help pay for the massive cleanup and spill-related claims. Company spokesman John Christiansen said the comments were in response to “a week’s worth of testimony” and other information and data compiled on the disaster.

    “The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP’s reckless decisions and actions,” said Hackett in the statement. “We recognize that ultimately we have obligations under federal law related to the oil spill, but will look to BP to continue to pay all legitimate claims as they have repeatedly stated that they will do.”

    The information disclosed this week “indicates BP operated unsafely and failed to monitor and react to several critical warning signs during the drilling” the statement continued. “BP’s behavior and actions likely represent gross negligence or willful misconduct.”

    BP chief executive officer Tony Hayward said in a statement that the company strongly disagreed with the allegations

    “These allegations will neither distract the company’s focus on stopping the leak nor alter our commitment to restore the Gulf coast,” Hayward said. “Other parties besides BP may be responsible for costs and liabilities arising from the oil spill, and we expect those parties to live up to their obligations.”

    Anadarko had no employees on the well and was a non-operating partner in the project. A subsidiary of Mitsui & Co. Ltd. of Japan had a 10 percent stake. The rig was owned by Transocean Ltd. of Switzerland and operated by BP.

    Anadarko also hinted at potential legal action against BP.

    The statement said BP had a duty to perform the drilling “in a good and workmanlike manner and to comply with all applicable laws and regulations.” The contract also holds BP responsible to its co-owners for damages “caused by its gross negligence or willful misconduct.”

    Christiansen would not say whether Anadarko could be absolved of paying spill-related costs if lawmakers find BP negligent, or confirm that Anadarko intends to take legal action. “We’re looking at what’s available to us under our contractual remedies,” he said.

    Anadarko said any actions it takes “to protect its rights relative to BP’s performance” will not shift the financial burden to taxpayers.

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