Wednesday Slide Show – Natural Gas Supply and Demand + The Oil Preview (Advance Issue)

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Market Sentiment Watch: As nervous as she gets. Everyone eying the S&P 1040 level which was broken temporarily in late trading yesterday. Fundamentals are already on holiday and technicals are in charge as we approach the last day of the quarter.

What Took So Long Watch: State Department says it will start to accept the help from other countries with the Gulf spill. This is day 72. State went on to say that this does not mean the U.S. has not already accepted some help. Uh huh. 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Supply and Demand Slide Shows - Supply Data For April Shows Flat Production Vs. March; Demand data shows a 5th Up Month for Industrial Consumption on a YoY Basis.
  4. Oil Inventory Preview
  5. Stuff We Care About Today – KOG Operations Upate
  6. Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $6,000
  • 99% Cash
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.

ZIM (Zman Inefficient Markets portfolio)

  • $2700
  • 7% Cash
  • Yesterday’s Trades:
    • BEXP – Added (10) more July $17.50 Calls for $0.34 with the stock at 15.76. These are the same ones I added for $0.90 yesterday.

      BP – Added (10) July $31 calls for $0.60 with the stock at 27.70. Two comments in last 2 days from BP and Coast Guard that the relief wells are closer than previously thought. I don't plan to hold through the actual intersection of the wellbore as there is still a good chance they miss on the first try.

Commodity Watch:

Crude oil retreated $2.31 to close at $75.94 yesterday.  After the close, the API released a fairly bullish looking report (see below). Multiple OPEC ministers in the last 48 hours have said the $70 to $80 per barrel range is comfortable for now.

Natural gas fell as well, dropping $0.19 , or 4% to close the day at $4.55 yesterday. See following sections on natural gas supply and demand comments/charts.

  • Natural Gas Supply For the Month of April - Quick Charts here, more indepth charts and comments in the section below.

Early Read On Natural Gas Storage: Street is at 65 BCF for tomorrow’s report.

  • Last Week: 81 Bcf Injection
  • Last Year: 73 Bcf Injection - supply is probably about 2 Bcfgpd (14 B's per week) higher than it was at this time last year
  • 5 Year Average: 80 Bcf Injection
  • 10 year Hi: 99 Bcf Injection
  • 10 year Low: 60 Bcf Injection

Natural Gas Supply Slide Show - Flat Month To Month, Nothing To Get Excited About On The Supply Front ...

Key Points:

  1. April was flat with March production
  2. and up 1.75 Bcfgpd from year ago levels.
  3. So little hear for bulls to be happy about .... yet ... and again.

... However The Demand Front Is Showing Signs Of Interesting Strength From The Industrial Sector

Key points:

  1. Industrial demand up year over year for the 5th straight month
  2. Electrical demand benefiting from lower gas prices relative to coal 


Oil Inventory Preview

API Watch: Nutshell: Bullish

  • Crude: DOWN 3.4 mm barrels

    • Big drop in Cushing inventories, down 1.9 mm barrels. This would be very much welcomed by the market.
  • Gasoline: DOWN 0.9 mm barrels
  • Distillates: UP 4.0 mm barrels

Stuff We Care About Today

KOG Operations Update

1) KOG is obviously having trouble getting in line for frac crews. This is not surprising given their small size and the 128+ rigs now operating in the Williston Basin. By the way, if you or a friend are looking for work you can probably find it there as this is a boomtown play now.

2) The rate on their #13 well, of 1,517 BOEpd, is impressive for a short lateral. It seems clear they're honing their completion methodology.

3) Three more wells waiting on completion, not far away (one in July, one in August) but still well behind where we thought from the 1Q call. Again, having two rigs is nice but not a guarantee that you can make your time lines, especially if you are a minnow.

4) Their Three Forks test was set to spud in the first half. This has not yet spud and is said to be a 4Q completion. Slow, slow, slow.

5) They are drilling outside of the FBIR in their Grizzly acreage (in the Elm Coulee area) which is a good to see as the story will need to move off the Reservation, so to speak, to really leg up from here. One re-entry that will be completed in 3Q and then a new drill long lateral, both targeting the Bakken. Along with their Koala area they now have 9,565 net acres in McKensie county, N.D..

6) If I were a modeling analyst on the name I'd be thinking to push numbers out into the future as their time lines are soft. A modest offset is the marketing deal announced in the update that will help reduce transportation costs from a portion of their original acreage position.

Odds & Ends

Analyst Watch:

  • TBA ----

130 Responses to “Wednesday Slide Show – Natural Gas Supply and Demand + The Oil Preview (Advance Issue)”

  1. 1
    zman Says:

    Asian off lows,

    Dollar slightly lower,

    commodities off lows,

    pretty flat and equity futures in the U.S. up slightly.

  2. 2
    BirdsofpreyRcool Says:

    ADP Estimates U.S. Companies Added 13,000 Workers (Update1) 2010-06-30 12:33:18.265 GMT
    By Shobhana Chandra
    June 30 (Bloomberg) — Companies in the U.S. added fewer workers to payrolls in June than forecast, according to data from a private report based on payrolls.
    The 13,000 gain followed a revised 57,000 increase the prior month, data from ADP Employer Services showed today.
    Economists surveyed by Bloomberg News had anticipated an increase of 60,000, according to the median forecast.
    Companies may be reluctant to add to their workforce until there’s evidence the gains in demand will be sustained.
    Economists in a Bloomberg survey project a Labor Department report in two days will show payrolls fell this month due to a plunge in government employment of temporary workers for the census.
    "Private hiring is still pretty dire," David Semmens, an economist at Standard Chartered Bank in New York, said before the report. "Although companies over-fired during the recession and are now reporting better sentiment, they are in no great rush to hire."
    Projections in the Bloomberg survey of 36 economists ranged from 23,000 to 100,000 after a previously reported 55,000 gain in May.
    Over the previous six reports, ADP’s initial figures were closest to the Labor Department’s first estimate of private payrolls in February, when they overestimated the drop in jobs by 2,000. The estimate was least accurate in April, when it underestimated the employment gain by 199,000.
    Less Reliable
    "The ADP data appear less reliable when employment trends are changing, as they are now," Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. "The ADP estimate lagged the deterioration in jobs in late 2008 and lagged again as employment leveled out in the second half of last year."
    Overall payrolls fell by 115,000 in June, reflecting a drop in federal census workers as the decennial population count began to wind down, according to the Bloomberg survey median ahead of the Labor Department’s July 2 report. Private hiring, which excludes government jobs, rose for a sixth consecutive month, economists projected.
    The Labor Department figures will also show the jobless rate rose to 9.8 percent this month, according to the Bloomberg survey median. Unemployment is hovering near a 26-year high of
    10.1 percent in October.
    Construction Down
    Today’s ADP report showed a decrease of 17,000 workers in goods-producing industries including manufacturers and construction companies. Employment in construction fell by 35,000, while factories added 16,000 jobs. Service providers added 30,000 workers.
    Companies employing more than 499 workers expanded their workforces by 3,000 jobs. Medium-sized businesses, with 50 to
    499 employees, added 11,000 jobs and small companies decreased payrolls by 1,000, ADP said.
    While payrolls have increased each month this year, it may take years to recoup the more than 8 million jobs lost since the recession began in December 2007, the most of any downturn in the post-World War II era.
    Federal Reserve policy makers this month said the labor market was "improving gradually," and reiterated a pledge to keep the benchmark interest at a record low for an "extended period" to help nurture the recovery.
    Toyota Jobs
    Manufacturers expanding employment include Toyota Motor Corp., the world’s largest automaker. Toyota said on June 17 it will complete a plant in Blue Springs, Mississippi, and hire 2,000 workers to begin production of Corollas by the end of next year. The company had mothballed the project 18 months ago as U.S. sales collapsed.
    The ADP report is based on data from about 500,000 businesses with more than 21 million workers on payrolls. ADP began keeping records in January 2001 and started publishing its numbers in 2006.

  3. 3
    BirdsofpreyRcool Says:

    From Madison Wms morning commentary (this is just so wrenchingly sad, bad, and maddening —
    Deepwater Drilling & Local Impact – executives from BP XOM CVX NE RIG DO HERO HAWK, the API, and the National Ocean Industries Assoc. came away from a meeting with US Interior Secretary Ken Salazar without securing promises to end the moratorium. Multiple operators informed Salazar that they were in the final stages of mobilizing their assets to West Africa and the Middle East. According to a person familiar with the matter,  “…we were frankly disappointed at the lack of serious attention that was paid by the Dept. of Interior on the horrible economic impact that the Dept.’s policies are having on the industry and on communities along the Gulf Coast.”

  4. 4
    john11 Says:

    Boone Picken's on cnbc this morning, didn't see BP relief well shutting anything till Sept at earliest.

  5. 5
    milepost_43 Says:

    charts are "fuzzy" this morning….???…using Firefox….like to read robry825 Sun night blog…seems this week may be especially interesting
    "This upcoming week will be one to watch for changes as Tuesday marks both the beginning of a new month and the beginning of a new quarter. Gas flows tend to like to change around such days, as factories & retailers adjust to changing trends in orders and inventories in their scheduling of production and purchases for the upcomming new month or quarter."

  6. 6
    Paul in Kansas City Says:

    Z; your reveiw of the data is such a timesaver!  I just missed my limit order to buy more BEXP yesterday; i think there is a chance today.
    thanks for the great work!

  7. 7
    zman Says:

    John – Boone just being controversial like Simmons or does he think he know's something?

    MP – They look clear to me. Don't know what they look fuzzy to you.

    BOP – Salazar is a friend of higher oil and natural gas prices.

  8. 8
    zman Says:

    Thanks Paul.


    Emailed in from Nicky:

    we should make a low between now and the 1st and then turn higher for a few days.  Probably move up to test the 1070 – 1080 area, then down to 960 or lower.

  9. 9
    john11 Says:

    He was just expressing his opinion.  Did mention Simmons btw, in thinking nuclear option was pretty crazy.

  10. 10
    zman Says:

    John – thanks. And he may be right, it may take a  month or two of tries, but I wouldn't characterize that as "September at the earliest". Big fan of TBP although I think he's beating his head against a brick wall with this administration.

    News flash: "It's Jobs Stupid" bumper stickers selling like hot cakes.

  11. 11
    BirdsofpreyRcool Says:

    FWIW…. credit markets green and TED still declining (tightening). 
    IG -2bps tighter
    HY flat
    TED +36.2 bps
    HeadTrader saying we are trading on fear and fear-mongering, not fundamentals. 

  12. 12
    zman Says:

    TSLA = probably ought to take off my screen.

  13. 13
    zman Says:

    Houston Ship Channel halted due to Alex. Definitely going to be some weirdness in the imports numbers next week.

    BOP – roger that, fear factor in charge in front of Friday. I'm still guessing now White House speech this week about how great the jobs numbers are.

  14. 14
    zman Says:

    TNK-BP saying it may buy some BP assets, reason for the move in the stock today.


    BOP – clearly HT is right, analysts completely backing away from the market, as told by the poor showing on the upgrades/downgrades pages.

  15. 15
    zman Says:

    Group trying to bounce. Don't really trust, but already long just in case.

    SSN over $0.80. Nice arb to the $0.577 rights offering price.

  16. 16
    zman Says:

    BEXP actually green, color me shocked.

    SSN at $0.85. Guessing someone knows something about how well subscribed this puppy is.

    TSLA up 20%. Ugh.


  17. 17
    BirdsofpreyRcool Says:

    HT right again… buy KOG below 3.30, hold, sell above 3.60.  Rinse and repeat.

  18. 18
    zman Says:

    Agreed BOP. Feeling the same way about TAT.

    Chicago PMI, lower but in line with expectations.

  19. 19
    zman Says:

    SSN at $0.90. Wow.

  20. 20
    zman Says:

    30 minutes until oil numbers

    1 hour until everyone tunes out to watch the men's qf at Wimbledon.

  21. 21
    zman Says:

    SSN up on much larger volume today, especially given how early in the session it is.  Interesting. JB – any chart thoughts there?

  22. 22
    zman Says:

    … because it looks a little cup and handle-ish to me, with the old high in April at $0.94.

  23. 23
    md Says:

    I'm looking at the smallcap ranks of 5/1/10.
    In Which categories does GMXR fall short. What do you believe there potential to be.

  24. 24
    md Says:

    typo : should read 5/19/10

  25. 25
    elduque Says:

    TED spread narrowing dramatically.

  26. 26
    zman Says:

    SSN – My accounts are showing a full allocation (for the second time after disappearing once).


    MD – my real issue with GMXR are management and gas prices. They get pretty pie in the sky in their presentations but have had to pull back production numbers a couple of times which really burned the name. Need to look at valuations again there but not really expecting a big rally in natural gas soon (this year) other than weather related spikes. 

  27. 27
    zman Says:

    Pati or anyone, have you seen an SSN allocation yet?

    Thanks Eld – noting that all the drybulk names hit their lows of the year yesterday which is not surprising but some of them are off 50% in the last 10 weeks. Ouch.

  28. 28
    BirdsofpreyRcool Says:

    Salazar testifying about oil drilling…

  29. 29
    zman Says:

    Bill – you out there? This China slowing thing seems way over done as it pertains to the shippers. China may slow but going from 11% which is unsustainable to something like 9% is probably pretty healthy for them. The shippers have gotten pummeled over this. Not that I'd buy DRYS but at $3.60 it's like a perpetual call option. Even better, EGLE at 4.37, EXM at 5.19, NM at 4.85. Wow. Been awhile since I did a table on that group as I've just been watching rates slide. Any thoughts Bill or anyone?

  30. 30
    Popeye Says:

    ST debited my account the full amount but no shares.

  31. 31
    zman Says:

    BOP – don't see it, what channel?

  32. 32
    Jerome Blank Says:

    RE: #21, SSN,  new P&F buy signal with the $1 print, added a 30 min chart perspective…

  33. 33
    zman Says:

    Site experiencing a little slowness, will activate back up if it persists.

  34. 34
    VTZ Says:

    Is SSN going to get sold off to net the premium once all those shares are available?

  35. 35
    zman Says:

    EIA Oil Inventory Report:


    Crude: down 2 mm barrels (2x what was expected)

    Gasoline: up 0.5 mm barrels (was supposed to be down)

    Distillates: up 2.5 mm barrels (bigger than expected)

  36. 36
    BirdsofpreyRcool Says:

    Bloomberg has it on live… probably on CSPAN somewhere too. 
    Good education on why we don't want to give a single person this much power over an entire industry.  He doesn't know what to do yet… he has some "personal opinions" but hasn't yet met with enough people to formulate a recommendation. 
    No sense of urgency that people are holding their breath over this.  "La-dee-dah… can I have another cup of coffee, while I decide what to do about your livelihood?"

  37. 37
    zman Says:

    More EIA

    Production and imports decline from their peaks in the previous week

    Gasoline hit a new high for demand this year at 9.462 mm bpd

    Distillates backed off quite a bit

  38. 38
    zman Says:

    More EIA

    Cushing inventories reflected the drop seen by API, falling from 36.8 to 36.0. That should help crude.

    So far crude off 30 from time just before report, now at 76.12.

  39. 39
    zman Says:

    BOP – CSPAN 1 – 3 have various views of idiots on parade now but they didn't bother to cover that particular one. Thanks for the headsup.

  40. 40
    ram Says:

    Haven't seen any debit or dist for SSN.  WFC stated that I wouldn't see anything for 5 to 10 business days after 6/28/10.

  41. 41
    skimo Says:

    Schwab completed SSN allocation at fully allotted amount. Account looks right this morning except it won't compute market value.

  42. 42
    zman Says:

    Re 34. I would imagine once the shares are settled in the accounts there is certainly going to be some flipping. I think the name is worth over $1 and that that can be argued fairly easily. Will this prevent me from a taking a current 57% instant gain on the rights shares (assuming current price is available), um, well, probably not. Not in this lovely market. It just seems prudent to keep my original shares and the recently taken ones and punt some or all of the rights shares. I may not do it the first day, depends on how it trades. 

  43. 43
    BirdsofpreyRcool Says:

    Representative — "why the blanket moratorium on offshore drilling when your own industry experts advised against that, given the unique circumstances of the BP spill?"
    Salazar — "because I want to"
    (paraphrasing… but that is the jist)

  44. 44
    zman Says:

    Skimo – me too exactly. I would bet that the full allocation still gets recomputed to a lower figure.

  45. 45
    mattlee Says:

    Re: SSN
    I had to call in to Schwab over the phone to request my allocation on Monday b/c the online system wasn't working.  Still don't see anything. 

    Went through the entire process with E-Trade only for them to call me yesterday and tell me I wasn't eligible b/c I bought my shares May 20, after the May 18 date.  Asked them why they sent me the offering paperwork and emails.  They said it's easier just to send it to everybody instead of filtering out just those ppl who held shares on the date.  Lovely.

  46. 46
    zman Says:

    V – the other thought would be to sell some of my original shares into this strength and see how I do in the rights offering. I've got shares in the $0.40s and a few more in the $0.74 area. So if I just want to keep it from getting overweight I can take some of those out in here. I do wonder a bit about the sudden strength today. Some Australian brokerage beating the drum on it? Hmmm


  47. 47
    BirdsofpreyRcool Says:

    Representative — "why not lift the moratorium, in light of the fact that it is doing more economic damage than the spill itself?"
    Salazar — "Because oil companies haven't coughed up enough campaign contributions yet and haven't promised to build only windmills and solar panels in the future."
    (still paraphrasing, but gives a sense of where it is all going)

  48. 48
    zman Says:

    Mattlee – had to do the same thing. Am showing the shares and then another line with XXXSUB FOR RETEX  and the count on those shares. I did that Friday. They will send that stuff even if you aren't entitled because they hate trees.

  49. 49
    Geno Says:

    BOP #47 – can you send me the link, I can't seem to find it?

  50. 50
    zman Says:

    BOP – that's like the government asking Apple why they haven't gone in a different direction to replace the computer. Sheesh. Still, if you want higher oil prices he's your man. I'm sure he'll be all over onshore fraccing when he's done botching up the offshore.

  51. 51
    BirdsofpreyRcool Says:

    Geno — if you have a bloomberg, i can send you that link… it's on BB TV right now.

  52. 52
    BirdsofpreyRcool Says:

    Geno — try this on bloomberg…. BBTV 267886 <GO>

  53. 53
    Geno Says:

    BOP, apparently I'm not a subscriber -Thanks anyway.

  54. 54
    skimo Says:

    re 47-Latest update-Salazar-"I'm going to be all over those oil companies like Al Gore on a Masseusse."

  55. 55
    elijahwc Says:

    "SSN at $0.85. Guessing someone knows something about how well subscribed this puppy is. "
    Reminder: It needs to be.  The company has acreage that requires either a purchase or a drill bit on a timeframe in order to close the deal on the 60% of the Niobara.  And, this probally influences what happens on the other 40% as well.  Otherwise the deal sheet goes poof.
    #34 – Yes

  56. 56
    BirdsofpreyRcool Says:

    Geno — look at it this way… at least you will be able to keep breakfast down.  This testimony is nauseating.

  57. 57
    zman Says:

    re 55. Partly true

    If the Unit is not formed and the drilling operations are not commenced prior to the leases’ expiration   US$ 61.0 million

    This is the low end of the range on the acreage but certainly not "poof". I used the low end in valuing their remaining acreage.

  58. 58
    BirdsofpreyRcool Says:

     z — with respect to comments that hedge funds are closing their doors at an increased pace… there were two $1B funds that blew up a coupla weeks ago (Crosslink and Intrepid).  They have both been around for a while, so not newbies.  But, that is not particularly out of the ordinary.
    And on the other side of the coin, HeadTrader pointing out that he heard of 3 new $50mm HFs that opened recently too.  So, money still flowing toward risk assets.

  59. 59
    zman Says:

    BOP – Thanks for circling back on that, will relay to the interested party.

  60. 60
    zman Says:

    Yet more EIA

    Things that are supportive for oil in this week's report

    1) A second week of dropping stocks at Cushing, OK. If you combine the two weeks drop it is apparent that API has a pretty good handle on what's going on there. Midwest refiners are running full tilt (about 92%) which is 4% above the national average at the moment so this is helping to offset the flood of Williston Basin crude entering the area.

    2) Gasoline production was up last week which was part of the reason for the build in gasoline stocks today. It is at the point where it peaks on an annual basis.  Imports also took a big bump up.

    3) Gasoline demand was also up, in fact more than production, so without an anomalous bump in gasoline imports, stock's would not have built. It is unlikely that imports remain at this level. 

  61. 61
    zman Says:

    BOP – you have JD's thanks on that.

  62. 62
    zman Says:

    EIA Wrap – Got through all my data points. That was a bullish report except for a steep drop in demand for distillates, out of the recently elevated range and back to the lows. Couple of thoughts come to mind. Could be an EIA true up. Could be exports fell back away. Either way, refiners will need to cut production or the bloat there which is already out of hand will get worse. If they cut production of distillates to prevent that, this also necessitates cutting gasoline (since you make both, to varying degrees at the same time). Gasoline demand is not going to peak for another 4 to 8 weeks. Gasoline production should be just about topped out. That is good news for gasoline prices (staying high) and for oil.

  63. 63
    Pati Says:

    Z, we both have Charlie.  Had the same experience, appearing and disappearing.  Now have my full allotment and debited. 

  64. 64
    zman Says:

    Pati – thanks for the feedback. I'd bet they get it sorted before the weekend.

    HAL getting a reprieve today, nice to see. All action probably moot pre Friday's payrolless number.

    The wife tells me it's really nice outside, low temp, low humidity, feels like Spring. I told her how terrible that is but she just doesn't buy it.

  65. 65
    AAA Says:

    Z, Nice timing with the BP add.  It's up 3% today.

  66. 66
    zman Says:

    Site slow again. The good news is that according to my host's test, it is not my software, even though they insisted it must be. They're fired as of mid July. My humblest apologies for site delays until then.

  67. 67
    zman Says:

    AAA – thanks but it has a long way to go before I'm even remotely redeemed in the spill corner. Ugh. The new position was why I was asking about TBP's comment on September … that would be a bigger problem for them. He may be right but it's probably more like a coin toss and I'd still bet they get a bunch of tries and succeed before then.

  68. 68
    zman Says:

    … And then everyone can go back to trying to run calcs on liability at least with a capped barrel count.

  69. 69
    Jerome Blank Says:

    BP…$29 is the resistance point to watch

  70. 70
    zman Says:

    Anyone see any comments on EOG by the Street? Below $100, down about $9 in 3 days and running counter to the group today.

  71. 71
    elduque Says:

    Is it possible to calculate or guessitmate how much more the costs of drilling offshore is going to be relative to land, given unlimited liability.
    Will it even be economical to drill offshore?

  72. 72
    zman Says:

    Thanks much JB.

    BOP – any additional color from KOG on the decision to move the TFS back to a 4Q completion?

  73. 73
    zman Says:

    re 71. Very good question. I know the canceled/postponed the next lease sale but honestly, who will want to bid on new offshore acreage if any one well can end you?

  74. 74
    zman Says:

    S&P just can't get any traction. Starting to think market players are getting too bearish. Before you throw rocks at me, I'm not uber bullish or anything but honestly, a lot of stuff like energy names are way off with the broad market and yet that which they sell is doing pretty well. I'm not going to complain if I'm a Bakken guy about $75 oil. Unless China really rolls then oil is unlikely to fall very far and they continue to consume more and more natural gas, taking much of that supply away from the States.

  75. 75
    elduque Says:

    I am probably the most bearish person on this site. I really think that it is going to take a long time to get us out of the debt mess we are in. However, things are not as bleak as they were in 08. I do think that most of this downdraft is Euro related and uneasiness in the credit markets. However, the TED spread is improving each day. I have loaded up on AEZ, HK, FCX and POT. Probably will add a little SU here as well. Not sure where the price of oil should be, but if it holds here, you got to love the onshore cos.

  76. 76
    zman Says:

    Group / market looking very holiday like. BEXP does more volume usually in the first 30 minutes of the day.

  77. 77
    zman Says:

    Test – please ignore the next 10 comments.

  78. 78
    petra Says:


  79. 79
    zman Says:


  80. 80
    petra Says:

    Ping ping

  81. 81
    zman Says:

    Pong pong

  82. 82
    petra Says:

    The only thing slowing me down is wordpress time out for comments. FKeditor deactivated.

  83. 83
    zman Says:

    Lightning fast at the moment. Keep the plug in offline.

  84. 84
    zman Says:

    That was slow again.

  85. 85
    petra Says:


  86. 86
    petra Says:

    That is really slow

  87. 87
    zman Says:

    Thanks to the little bird who sent this re my EOG comment

    From Jefferies:
    Niobrara deal casts concern over what many believe could be the next big onshore shale oil play… earlier this week Voyager (VYOG, $3.57, NC) bought 50% of Slawson’s 48,000 net Niobrara acres for $313/acre, well below the previous range of $1,000-$3,000/acre. VYOG agreed to pay Slawson $7.5 million up-front and participate 50/50 on all wells drilled in the AMI. The Slawson/VYOG acreage is primarily located in Weld, CO and Laramie, WY. Companies with high relative Niobrara exposure include EOG (EOG, $100.24, Buy), Noble (NBL, $60.27, NC), Rex (REXX, $9.83, NC), and Petroleum Development (PETD, $26.21, NC)…ek

  88. 88
    zman Says:

    BP up 5% now. Hmm.

  89. 89
    zman Says:

    NG trading flat

    Crude trading back up to pre inventory report levels. I’m sticking with my comment about that being a bullish report.

  90. 90
    zman Says:

    Moody’s to possibly downgrade Spain.

  91. 91
    zman Says:

    Does anyone have the Wunderlich initiation piece on VYOG. It was a few days back as I recall. That price per acre puts some interesting spin on the SSN deal. As in why is VYOG’s acreage buy so cheap, is it well out of the area we think will be the fairway? Digging. And putting VYOG on the watch list.

  92. 92
    BirdsofpreyRcool Says:

    Latest from XACS#1

    Similar to last Friday, the CDX IG14 Index has tightened 3.5bps (3.0% move) and the SPX is flat. Historically, 3.5bps of spread tightening, intraday CDS/SPX volatility relationships, and current index levels would indicate that the SPX should be in the +8 to +11pt range. If we used yesterday’s volatility relationships it would indicate that the SPX should be up in the +16ish range. Regardless of equity market’s decision to go its own way…equities are biased to rise based on credit market activity…….. The divergence of credit and equity market performance during rallies and their convergence during sell-offs does not appear to indicate that another credit market crisis is around the corner, in our opinion. The ability of the credit markets to continue to work through deals even when the equity markets are in turmoil, as well as the steepness of investment grade credit curves, indicates that credit is repricing itself rather than indicating that underlying assets are overvalued. Overvalued underlying assets breeds default risk and inverted credit curves. The shape of credit curves and the divergence might actual indicate a growing shift in investor concerns away from company Balance Sheets concerns to the Income Statement. Slower than expected economic growth is unlikely to cause a surge in investment grade defaults, but slower growth will likely make it more difficult for investment grade companies to meet revenue targets in 2H10. Funding decisions will still provide positive BS events…ie ACAS and Sprint…. but IS worries can exist and persist even when credit and BS concerns wax….for example….bank preferred shares are only down modestly compared to their equity.

  93. 93
    zman Says:

    VYOG – $7.5 mm for 50% working interest in Slawson’s 48,000 net Niobrara acres. Slawson is a very good operator in the Bakken, planning 3 test wells starting in July with completion expected by October, then a continuous program through 2011, bringing total well count to 60 by end of 2011 – that’s ambitious. VYOG getting in for quite the song on those acres ($312 /ac). This simply must not be the happy hunting grounds that EOG is looking at. But it is in Weld County. West, Reef, anyone, got a clue why so cheap on the buy in? Digging myself.

  94. 94
    BirdsofpreyRcool Says:

    I just don’t get it… why does HK continue to get kicked in the beak? Is Fido STILL selling??

  95. 95
    AAA Says:

    I think advocates of deepwater drilling are kidding themselves if they think things will go back to normal once this well is capped. We have seen the only real strategy for dealing with a blowout is to let it spew oil for three months while relief wells are drilled. You don’t have to be a radical environmentalist to see flaws in that. The Gulf is like a football player who suffers a serious concussion. Another one anytime soon may be deadly.

    We have seen that regulatory oversight is weak, and even a major oil company can make incredibly irresponsible decisions. The cleanup fund and liability caps are vastly inadequate.

    Ultimately, the increased costs will be borne by the resource owner, the U. S. taxpayers. If fees are increased to cover future spills, it will have the effect of lowering what companies will pay for drilling licenses. What the government can do with existing leaseholders will no doubt be the subject of lengthy litigation. There is a certain Hugo Chavez quality to granting a lease, getting paid fo rit, then vastly increasing the costs the leaseholder must incur. At some point, I fully expect obama to propose creation of a national oil company that would have exclusive rights in deep waters, all in the nmae of environemntal protection of course. Call it FNM II.

  96. 96
    West Says:

    http://www.qepres.com/……STR will spin off QEP at the end of closing today. STR will remain the regulated entities and QEP (Questar Exploration and Production) will be a major E&P co. KOG would be a strategic fit around their Lake property on the Reservation.

  97. 97
    zman Says:

    BOP – Kind of looks like it, volumes have been stronger there today than for the peers. Don’t see a reason.

    You know VYOG. Interesting set of assets now. 24K net in Niobrara, 24K net in Bakken, plus some other odds and ends. Stock came from a buck in April to $4 ish now. Slawson has made some big wells in the Bakken for the likes of NOG. If they do that here it could be interesting, especially if it will pull back. Still scratching head over that acreage valuation.

  98. 98
    West Says:


  99. 99
    zman Says:

    West – Thanks, have had the QEP on my current market watch for days waiting for it to come out. QEP doing lots of good work in a lot of places.

  100. 100
    zman Says:

    Although, looking at VOYG’s website, alarm bells are going off, looks hypy without a lot of depth.

  101. 101
    zman Says:

    VOYG – balance sheet solid, income statement non-existent, CEO has been in the family biz, can’t really tell how much experience they have on their team.

    They have some cash, no debt, not a lot of shares out so it’s a micro cap, if you put some low prices on their acreage you’ve got the market cap justified but it’s obvious with Slawson’s drill plans for the Niobrara alone this name is going to need funding before it sees almost any oil out of the ground. RMD, you know this one?

  102. 102
    RMD Says:

    never heard of them.

  103. 103
    zman Says:

    RMD – then color me shocked. It’s a single digit midget that came out of nowhere, ticker change and new CEO and a big leg up since April and it has some Street coverage. Acreage play now, reading SEC docs as their website is what I’d call poor. Stock is BB and trades like it … by appointment and with a massive spread. Worth watching for a big bad red market swoon day though as they stole that acreage. Maybe it’s in a bad area, or past the pinchout or maybe it’s highly fragmented but then there is the Slawson involvement and that is not a dumb outfit. So I’m intgrigued.

  104. 104
    BirdsofpreyRcool Says:

    VYOG — ha! company used to be “World Poker Tour”…

  105. 105
    zman Says:

    If that price is the reason for EOG being down this much … well that’s just silly. That’s a small deal and the price is fishy.

  106. 106
    BirdsofpreyRcool Says:

    VYOG — yep. Sold all their assets last August… was just a shell company with some cash at that point. Guess they found the next hot play (after online poker didn’t work out so well for them)….

  107. 107
    West Says:

    QEP has a double layered Middle Bakken and 3frks horizontals that are drilled under the lake just north of KOG . They have offset dual parallel wells to be drilled. No chatter at all about this 3frks , personally I think that the 3frks is going to be about 50% of the EURs of the Middle Bakken in this area. If they can reduce cost by drilling mutliple wells from same pad it should be economical.

  108. 108
    zman Says:

    BOP – The chairman’s resume is priceless. Total vegas.

    The CEO sounds like he was a land man manager:

    James Russell (J.R.) Reger was the Chief Executive Officer of the Company since December 31, 2009 and has been our Chief Executive Officer and a director since April 16, 2010. Mr. Reger was born and raised in Billings, Montana and is the fourth generation in a family of oil and gas explorers and developers dating back more than 60 years. Mr. Reger’s great grandfather was Vice President of Land for Mobil Oil’s Rocky Mountain operations. His grandfather, Jim Reger, co-founded the exploration firm of Norsworthy & Reger. Prior to accepting the position as CEO of the Company, Mr. Reger was the President of South Fork Exploration, a mineral leasing company in Billings, MT with experience and interests in Montana and North Dakota. Mr. Reger holds a B.A. in Finance from Baylor University in Waco, Texas. We believe Mr. Reger’s qualifications to sit on our Board include his extensive experience in our core business of oil and gas exploration and production.

  109. 109
    zman Says:

    West – agree on both counts. I’ve heard several comments re the 50% of the Bakken EUR. Does QEP have acreage to the east and south of the FBIR too?

  110. 110
    elduque Says:

    no quarter end pump up????

  111. 111
    zman Says:

    re 110 – maybe payrolls is killing that idea?

  112. 112
    West Says:

    109 …horseshoe around KOG under the lake but not the part that is the actual old river. 80k acres in this area. They also have some acreage next to EOG’s Niobrarra play in Wyoming. Maybe they bid for SSN’s property?

  113. 113
    zman Says:

    West – I would think too tiny. But I could see them filling in the doughnut hole that is KOG.

  114. 114
    zman Says:


  115. 115
    zman Says:


  116. 116
    zman Says:

    Got the Wunderlich initiation on VYOG. Thanks. Little there that my soon to be 7 year old daughter could not have penned.

  117. 117
    choices Says:

    JB-if you get a chance, would appreciate your thoughts on the EOG chart-as Z mentioned, the rout from the 110-114 level is a mystery, the buttugly nature of this mkt notwithstanding.

    Z-would certainly be interested in your conclusions if the VYOG land transaction is in any way related to this weakness in EOG-does not make sense from your previous comments.

  118. 118
    RMD Says:

    I take it back; looked at them and think the Reger is the brother of Reger in NOG. The “parentage” BOP notes in 104 and 106…somehow just did not appeal to me. (Remember I missed LEI also. Can it be my standards are going up as I age?)

  119. 119
    elijahwc Says:

    TBP interview from CNBC this am


  120. 120
    zman Says:

    Choices – that was a brokerage’s suspicion, that EOG was falling due to the VYOG. Seems very, very, very far fetched to me at this point.

    My how we suddenly hate coal stocks. See WLT.

    RMD – I knew you would know something there.

  121. 121
    zman Says:

    WLT from $100 to $60 since tax day. Yikes. That just doesn’t seem right. In May, WLT’s estimates for 2010 and 2011 were $7.54 and $9.25 respectively. Shortly after 1Q numbers came out, the Street saw the light and the numbers had jumped to $9.12 and $11.82 and have remained about there ever since. So, numbers go up, and stay there because coal prices have hung in there and yet the stock, which I guess you could say had had a good run, is now off 40%, contracting it’s multiples to 6.7x this year’s number and 5.1x next’s. That just seems overdone.

  122. 122
    Jerome Blank Says:

    RE: #117, Choices…updated the EOG chart, EOG is sitting right on support at the lower daily channel trendline, and although EOG went on a P&F sell signal today with the $99 print, it’s still trading above long term P&F trendline support, and even given current mkt conditions, this is a prime zone for a long try, I think stops need to be below the 200 SMA because all of these support points basically come together in the same area…in addition, $NYMO is starting to get into oversold territory… EOG could be setting up to be a bear trap, seems like an easy place to manage the risk for a trip back toward $110…if the mkt continues to fall apart, the 200 day is a reasonable risk…


  123. 123
    zman Says:

    JB Voted. I find the TED chart juxtaposed with the S&P chart pretty interesting.

  124. 124
    Jerome Blank Says:

    RE: #123, Zman, thank you…

  125. 125
    zman Says:

    JB – we don’t exactly look oversold for the broad market, do we?

  126. 126
    Jerome Blank Says:

    Re: #125, my indicators say, not yet… the McClellan Oscillator, $NYMO closed at -50.77, it’s starting to get oversold, but it’s not yet near the extreme levels observed back in May, so based on this indicator, there’s still a bit of potential downside possible, extreme oversold these days is anything under -80, in addition, the NYSE bullish percent went back into bear confirmed status and the $SPX P&F is currently on a sell signal…additionally, the 10 year note yield, $TNX (chart posted) has a price objective of 2.5%, suggesting still higher note prices, all adding up to it does not look like we are quite done yet….

  127. 127
    zman Says:

    Thanks JB, that’s what I was basing my comments off of. It’s slow around the site this time of year but know that I find your charts more than a little helpful.

  128. 128
    choices Says:

    Thanks, JB, for the charts-EOG-noted bear obj-would not like to see that attained-see if support holds-also noted that $BPENER is on bear mkt confirmation today-ugly markets.
    -also voted.

    Thanks, Z-it must be something else other than VYOG-have seen no news or comments.

  129. 129
    zman Says:

    AEZ on the tape with a new well, earlier than as expected per the Catalyst List, details will be in Thursday post.

  130. 130
    zman Says:

    re 129 – disregard, AEZ on tape with 30 day rates on old wells, pushing back completion timelines, like KOG.

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