Monday Morning

186 thoughts on “Monday Morning”

1. Z: The purchase by LINE of assets in East Texas (Gregg & Rusk Counties). Is this EFS country?

2. Tom – I would think not, that’s far east Texas and too far north for the play as it is currently defined. See the link of the map for the broad swath of counties that encompass the play on the Reports tab. That’s most likely E. Tx Haynesville.

3. HAL call at the top of the hour, notes to follow. Preopen up 4%, should have room to run to $30 in coming days. JB probably going to still like the chart but will wait for his comments.

   MMR quarter released too late for the post:
   Operational stuff was mostly covered a little while back in a release.

   Just summing up, Blueberry Hill shelf well looking better, nothing to report on the ultra deep front.

   The test of the discover well at DJ is now 3Q11. Ouch. That’s way out there. Production also not looking that hot.

   Jumping on the HAL call.

4. Crysball – were you able to log on?

5. Z: KWK in talks with India’s Reliance Indus LTD. Do you have any sense as to how high a quality company are they? I own some of the KWK bonds.

6. I think HAL estimates for this year need to come up to at least $1.67 based on this beat, 2011 up as well even though the Street never really adjusted for a slowdown in the Gulf…

7. HAL Call Notes 1:

   US: Utilization levels for many services are approaching the peak seen in 2006.

   Seeing potential for downward price pressure on NG pricing in coming months due to all the liquids rich gas plays, like the Eagle Ford, which, while targeting the oil window, nevertheless produce substantial gas volumes. This is an obvious statement but worth bearing in mind as it’s what is keeping the gas rig count up.

   Gulf of Mexico comments:
   Evolving,

   Will cause E&P spend to shift onshore and outside the U.S. to make targets.

   Seeing significant delays on the Shelf due to new rules.

   HAL does not see the rigs that have left, coming back for an extended period.

   HAL intends to keep infrastructure intact in the Gomex, but some equipment/people moving away with the rigs. Plan to be there when things become more clear from a regulatory standpoint.

   …

8. Tom – You mean Reliance? Well thought of. They are probably looking for a JV or farm in and not a whole company acquisition of KWK, is that what you are reading, will circle back after the HAL and MMR calls.

9. Jat – wasn’t thinking that aggressive due to the offset in the Gulf, you hearing that high a number from a sellsider?

10. Jat – Mexico comments on this call not so great, any thought as to a tough day for WFT regarding that?

11. Ted spread below .37 and Baltic looks like it has stopped going down.

12. HAL saying they provided all work on Macondo up to BP specs. Their contract with BP indemnifies them but they will not be taking BP/Deepwater Horizon questions during this call.

13. Re 9: No, this is my rough thinking, I am hearing higher from some bulls like Morgan Stanley. My thinking is they did $0.52 this quarter and are guiding to $0.08 impact from the Gulf, Q4 will also improve sequentially from Q3.

    As a quick overview of the more detailed analysis I have the US rig count coming off 100 rigs through the end of the year, sequential margins declines in NAM due to Gulf, margins flattish in all other regions, including D&E flattish, sounds like there was some seasonality there in the Q.

    Latin America really surprised me this quarter. With Mexico dying on a small base of only 2 rigs for them but Brazil growing, I have flat revenue/margins.

    This is all quick analysis and subject to revision, just my rough thinking.

    I met with WFT in early July, right now I still think they beat and guide up, but agree that if it’s true that each service company only got two rigs each in all different Mexican regions, that would really stink, as WFT is running more than 2 rigs.

14. *meant D&E europe flattish, which had some Q2/Q1 margin declines.

15. HAL…updated the 30 min chart for intraday perspective, opening at the daily 100 day SMA zone,if support here holds next major resistance at the 200 day at about, $29.25-$29.50, dailing down to the 30 min next support is at $28.40….

16. Thanks much Jat.

17. I told you on Friday, I’m wearing love HAL no matter what t-shirts, so take it with a grain of salt.

18. ZTRADE – ZCAT – HAL

    HAL – Added (5) HAL August $30 Calls for $0.90 with the stock at $28.80. Good quarter as expected but bigger on the EPS side than anyone of the Street was forecasting, good guidance going forward. See post and comments section for more details but estimates should be on the rise here. This is an entry position and I may add a second tranche today or tomorrow.

19. HAL Q&A – good tone, not hearing any buyback chatter.

    SSN – up 6% on decent volume, less than 10 days until go, no go on their expected Niobrara deal.

    SSN – Shares still in the accounts, no word on refund from partial allocation of rights subscription.

20. HAL Q&A

    on the 5 to 8 cent hit due to the moratorium in 3Q and 4Q, this assumes anemic activity on the Shelf and nothing form the deepwater.

21. HAL Q&A

    Is better activity and pricing in the U.S. onshore going to offset the weakness in the Gulf?

    Sounds like yes in 3Q and almost in 4Q. That’s a fair response.

22. 21 means that I could be conservative, obviously.

23. btw, the 2 rigs per customer PEMEX comment seems to be for Chicontopec only, not for all Mex basins, which makes much more sence.

24. I find it interesting that the NG stocks are trading on their lows for the year, when there is active buying of the companies either on a percentage basis or on a takeout basis by foreign companies. It just show how little love there is for them.

25. re 23. Yes, that’s how I took it too. May not bode well for this recent flattening of Mexico crude production.

    HAL Q&A

    Iraq – big numbers being tossed about. Why people keep asking about 2010 impact is beyond me. This takes time, will be big in 2012 but it takes time to walk through it. HAL will be a large player there.

    NAM – Don’t see a big wave of equipment coming into the market that could swap capacity / pricing.

26. Z: I am hearing Reliance is interested in KWK’s Powder River assets.

27. #24 – and hurricane season not yet started and super hot weather. My area is just short of double average CDD’s for this time of year.

28. HAL call wrapping up, switching to MMR

    HAL commenting again about how the shales are much more intensive than conventional drilling, this eating up of the equipment has helped balance out supply and demand.

29. What is going on with Hos ROV1? Bits of something keeps breaking off and floating away.

30. sorry, feed site. http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/incident_response/STAGING/local_assets/html/Hos_ROV1.html

31. Tom – thanks, interesting. Can’t imagine they want the PRB for its coalbed methane potential, betting they are looking at Niobrara there that others are exploiting now or looking to exploit in the DJ Basin.

32. S&P trading on the hinky side this morning.

    Nicky – any thoughts?

33. “The test of the discover well at DJ is now 3Q11. Ouch.” ZMAN – Will this keep pressure on EXXI for the mediun term?

34. MMR Call

    Saying that of course they are Shelf, not a Deep Water player. Things are taking longer than normal as the new regs come out. Shallow water has been done safely for over 50 years and 50,000 wells, they have been explaining this to the government, saying their practices are close to what the govt. is going to require, noting that their BOP’s are above the water line.

35. re 33. It certainly takes some sexiness out of the story but honestly, they were already backed off to 1Q11 at last comment so this is just further back in time. Have not heard what is causing the further delay, listening to call now.

36. Morning all.

    I don’t think the downside is done. Looking for it to move down to 1055 – 57 and if that fails then 1044. We have a 10 day cycle which is looking for a low in this timeframe but it could stretch out a day or two. Then we should see a move back to last weeks highs.

37. AAA – can’t get that feed to come up.

38. HAL backing off with the S&P, still strong on day, may add an other 5 soon as I average in.

39. Thanks much Nicky.

40. MMR — looking for info on Davy Jones #2. Although MMR says they won’t flow test DJ#1 until 3Q11, they are drilling DJ#2 with a larger bore hole. Should allow formation testing that was not possible at #1.

41. ZTRADE – ZCAT – HAL

    Added another (5) HAL August $30 calls for $0.83 in a volatile broad market with the stock at $28.65.

42. BOP – good point, any thoughts on the delay, can’t be a tree of equipment, could it be simultaneous (or nearly) testing of the two?

43. Nicky – Thanks again, always appreciate the levels. Was already into the HAL trade as you were typing, ignore her at your own peril fellas.

44. Think the DJ#1 test was pushed back b/c they will immediately tie it into a production line, after testing. So, no interim “testing equipment” … just jump straight to production. Wonder if they are just being super-conservative on timing… maybe the ananlysts will push for a little more info in Q&A.

45. HeadTrader did not think the morning’s green would hold. Ugh. He appears to be right.

46. BOP – lets talk logic here. We have:

    DJ 1 – looks successful but not yet tested and won’t until 3Q11

    DJ 2 – drilling

    Blackbeard East – drilling, after Blackbeard looked technically successful but again, no test, right, I don’t recall one and NFX would not have excused themselves if they had one but sometimes memory fails.

    LaFitte – to spud in 2H.

    Probably 10 other ultra deep prospects

    Wondering how much “up against it” they are in terms of lease term obligations. Otherwise, why not go into overdrive proving up DJ, then farming out the others? Hmmm.

47. Thinking DJ#2 results and testing should support DJ#1 estimates. Maybe they will be able to attract partners (at an attractive rate) at that time.

48. BOP – makes sense. I’m not hearing much new from Jim Bob today.

49. Wish the MMR guys in the office would hit the “mute” button when not talking… JB is tough enough to hear/understand withOUT all the coughing and paper-shuffling….

50. BOP – no doubt. Still not a lot new today, eh?

    Good explanation in the slides on why ultra deep and deep shelf are nothing like drilling in deepwater.

51. Z- would appreciate your quick thoughts on what would a Cat 3 + Gulf spinner might do to bounce E&P plays, like BEXP, HK, CHK etc?

52. Isle – Very much depends on where it is in the gulf. If it moves into the Central or W. Gulf MMS regions (I guess that’s BOEMER now), it would shut in 5 to 6 Bcfgpd for as much as a week. The structures on the Shelf have been hardened in the last 2 years and unless a 3 was pretty slow moving I would not expect as much damage as we saw a couple of times earlier last decade that resulted in shuts due to platform and pipeline infrastructure. A 4 or 5 is a different beast. A anyone, the surge in gas prices is typically not matched by the gassy plays and the hangover from a near miss often leaves both gas and the gassy leveraged names lower than the starting point. Oily names, or those that at least get most of their revenues from liquids like BEXP may see better performance due to a combination of shut in production and severely curtailed imports. Furthermore, oil can move if onshore facilities (refining) on the Gulf Coast are damaged which is fairly common and a 3 can do that. If that happens then oily names tend to move better than the gassy ones. In short, for a real storm related move to have legs for the gassy names, you really need to have infrastructure damage offshore.

53. Nicky – already bleeding off to your levels.

54. z how much trouble is it to put in current prices vs. cash flow projections for the midcaps.

55. Eld – will do it this week for ya.

56. Z – I will say the market is a very difficult forecast right now. I see a lot of up/down gyrations and I am sure most of us feel nervous holding anything longer than a day at the moment.

    Astro wise it also looks absolutely wild.

    Bigger picture I don’t see a low before September/October.

    So here is how it may play out:

    a low with the 10 day cycle this week and thinking support in the 1050 region holds it. Then a move up to last weeks highs or higher with resistance at 1104 – 1112. The another round of weakness into end of July/early August. This will bottom the 20 day cycle. Then a final move up to top the 45 and 90 day cycles (8/10th August we have a Gann turn date) and by this time the market could be at 1150 or higher.

    Once those cycles top out we should go down hard.

57. Move in HAL from end of the call to now has little to do with HAL and everything to do with the market.

58. Thanks Nicky, down hard being < 900?

59. XACS#2 weighs in
    —————————

    http://wjb.na.bdvision.ipreo.com/NSightWeb_v2.00/Handlers/Document.ashx?i=7abc389a302b49caa7c52e1cbf750bf2

60. yes Z – my target is around 890.

61. Gold needs to hold these levels +- 5 $/oz to avoid liquidation of a lot more positions.

62. Z: Saw CHK and STO dancing together in South Africa – Karoo Basin. Would you give the global footprint idea a slight reason for CHK outperforming a HK?

63. Nicky – thanks, thinking of a late summer early Fall shorting using near miss hurricanes (see above) and your run up before the fall. High beta gassy names aren’t going to get a lot of help from the commodity later this year. Could be realy ugly for gas levered stocks this winter as well(early forecasts are calling for a warm winter in the U.S. and Canada). I say why fight it?

64. CHK and HK pretty different now, I would not attribute any perf delta to that deal.

65. “Less clear and muddled.” true enough BOP. Hard to tell what you are going to wake up to each day this summer. Better to be cautious and slow on buys, quicker on sells, at least for me.

    Still mulling a sale of some of my SSN with that cautiousness in mind as we approach July 26th. Ridiculous gain in such a short time, especially for the rights shares.

66. Tks Z for your insight re my earlier hypothetical…..

67. Z – I need to take a closer look at the oil chart (after all this is an energy site!) but at some stage I think they sell oil off hard again – probably need to be further along in hurricane season first however. Any thoughts on the upside for oil in the meantime?

68. re 67. I think OPEC calls the ball in September, range of $70 to $80 is their current comfort zone. I think they have a very good memory of 2H08 and do not want a repeat. If the market falls out of bed you could see $60 but not much lower unless global demand goes lower next year and right now that looks pretty unlikely. Most agencies are looking for up 1 to 1.3 mm bop in 2010 and a similar gain in 2011, largely due to Asia. Meanwhile, Mexico is trying to halt the declines and the U.S. will roll back over a bit as Gulf production comes off and is only partly offset by Bakken, EFS, etc. With all that and more in mind, the call on Cartel oil is higher, giving them leverage to squawk about tighter compliance, and to do so more quickly, should oil prices start to drop. And given the move lower in the dollar, they have more cause to be vigilant early. That said, I don’t think they move on official production quotas in September unless we are below $65.

69. Saudi and Co. can’t be too please with the recent direction of this:

    http://www.barchart.com/charts/futures/DXU10

70. Duane Grubert asking good questions… but sounds like 3rd party engineers will NOT be able to assign any “proved” reserves to DJ until they get some firmer rock data. This DJ#2 well is pretty darn important to all parties involved. Should be able to run formation testing that was not possible with #1. Will be able to use this data to assign reserves to #1, sounds like. But not until then.

71. BOP – when is TD on DJ 2?

72. est’d TD/testing on DJ#2… don’t know. Has anyone else heard when that might be?

73. DJ#2… just saying that they are currently at 11,100 ft going to a proposed TD of 29,950. But they also hope to be able to test the Cretaceous (Tuscaloosa) in this well. So, if they get to 29,950 and haven’t hit it… but think they are close… they would probably keep going. Drilling at this depth with a fuzzy TD, probably smart not to put a precise timeline on it.

    If you don’t know… you can’t say.

74. BOP – my guess is around October based on depth now, TD, last well, give or take a month. Lemme know if you hear otherwise.

    Oil holding fairly firm. NG flattish, which is surprising considering the continued heat. I have not worked up my gas injection for the week but it should be sub 55 Bcf.

75. Dougherty initiated AEZ with a buy and tgtg of $8.50.

76. BOP – yeah, no doubt they would keep going, he really wants that Wilcox in a number of his ultra deep tests. They never counted any pay that low in the discovery well did they?

77. Thanks John had not seen. Don’t know their guy Geffen, doesn’t look like that shop has an energy focus.

78. Don’t know if they were just being conservative (as they were not able to get any type of direct formation testing), or if there was “no pay” in that last section in DJ#1. They never really said.

    What JimBob really REALLY wants to do, is to hit the Cretaceous (Tuscaloosa). Sounds like DJ#2 is his best shot at it, in the near-term.

79. BP update

    APA getting cold feet on the Prudhoe Bay asset buy … or they are playing the “walk away from the used car dealer” game. I think it’s the latter. They are interested but also shrewd buyers in the past. They the seller is in a bind and are twisting them.

80. hk at a yearly low

81. BOP – my bad, Wilcox just above, Tuscaloosa the stuff seen onshore in the woodbine of the east Texas field, no? They got into Wilcox on DJ1 but I don’t think they had a good core, shows they could talk about that deep, and didn’t get down to the Tuscaloosa in that well at all.

    Larry Nichols (DVN) must be feeling pretty smug at the moment, having dumped the deepwater just before Macondo and downplayed MMR/EXXI’s ability to complete at this depth. Surprised that name hasn’t performed better.

82. Bill – yeah, feels like a steal. Holding the common, not playing the options. Just no interest from the Street at the moment.

83. AAA – Finally got the feeds to work again. That connection on the stack is showing a small bubble trickle up. I saw a story overnight saying BP thinks that is nitrogen, not methane. They are going to try and sample it.

84. BP says pressure in Macondo continues to rise, now at 6,800. Thad Allen of the Coast Guard still has the ultimate authority to say the pressure test continues or they go back to producing into the Gulf.

85. For you “Most Dangerous Catch” fans. There is a great shot of a crab right now on the HOS ROV 2 feed.

    http://www.bp.com/sectionbodycopy.do?categoryId=9034366&contentId=7063636

86. re – they’re tracking a crab with an ROV. That’s got to be the most expensive fishing trip I’ve heard of. Goes to show the ocean flow isn’t an oil covered wasteland as some had said would be the case due to the all the dispersants used that would cause oil to stay low or go to the bottom causing a desolate, irrecoverable wasteland. This is ground zero and the crab is scuttling about, dodging robots.

87. NG back to unchanged on the futures

88. elduqe

    http://shipping.capitallink.com/files/Shipping_Weekly/2010/Cotzias/Cotzias_2010_Week_28_Report_16_Jul.pdf

    China is just cutting down on imports, to squeeze the traders that rely heavily on China’s
    intake to survive. This way China will impose their own prices and dictate the price that makes the raw material priced at such
    levels that the final product will still be better priced or ultimately China will combine both, obtain better prices so to sell more
    quantities and also generate more profit for its manufacturers. It is a clever game and that also ultimately squeezes
    transportation costs (seaborne costs) that are NOT NEGLIGIBLE anymore, just to give an example, say an importer imports
    1,000,000 tons of iron/ore in a month, and he reduces the per ton transportation price from $14 to $9 that is a $5mil saving in a
    month!!!!

89. #87 – weather updates show another invest near Puerto Rico. doesn’t look like much at the moment.

90. Elduque – I’ll put the mid cap charts updated for current in the post tomorrow.

91. after a lot of confusing alerts to my account I finally got my allocation of SSN…for once I did no yelling and screaming and got treated well anyhow…..very nice find Z…

92. Thanks, I figure HK has got to look very cheap from a histerical (historical) basis.

93. Jivey – the fact that it was not a pro rata deal made it pretty interesting. Also could mean that a lot of guys with 100 shares will now have 10,000 plus. Meaning it will be difficult for them to resist the temptation to flip for the nearly instant 81% gain as of the current bid of $1.05. Surprised at the lack of pressure so far.

94. z — sadly, I am not in SSN. But, you’re saying that some people got more (or less) than 75% of what they put in for?

95. Yoke, welcome aboard.

    You can find the initial TAT piece here:

    http://zmansenergybrain.com/subscriber-data/zeb-reports/

    or specifically here:
    http://zmansenergybrain.com/2010/02/21/transatlantic-petroleum-tat/

    There have been a number of delays in the game plan here due to weather and lack of in country equipment and the stock has been retreating on a lack of solid information along with the market of late.

96. BOP – sorry no, the deal had an A,B,C,or D level of shares. No matter how many shares you held, even if only one, you could put in for the max allotment (choice D) and you got 75% of those. The deal was repriced lower due to lack of interest and then they played their how-to-get-a-rights-offering-done whole card, which was the Niobrara acreage sale intention. That sent the offering into oversubscribed land with those subscribers getting transaction cost free shares for $0.5777. Pretty nifty.

97. Hedge Funds Raise Bull Oil Bets Most Since 2007: Energy Markets
    2010-07-19 14:23:18.772 GMT

    By Asjylyn Loder
    July 19 (Bloomberg) — Hedge funds and other large speculators raised bets that oil would gain by the most in more than three years just as it began to slide, the second straight week money managers lined up on the wrong side of the market.
    So-called net long positions on the New York Mercantile Exchange rose 67 percent the week ended July 13, the most since February 2007, according to the weekly Commitments of Traders report from the Commodity Futures Trading Commission. Oil fell on four out of five days on the Nymex last week, ending down 0.1 percent at $76.01 a barrel as of July 16. It rose 5.4 percent the previous five days, the biggest weekly gain since May.
    “Just like last week, when they were short when prices were up, now they were long when prices were down,” said Hamza Khan, an analyst with Schork Group Inc., a consulting company in Villanova, Pennsylvania.
    Oil slipped last week amid evidence that the U.S. economic recovery is slowing, reducing fuel demand in the world’s biggest energy-consuming country. Hedge funds suffered their worst second quarter in a decade this year, losing 2.79 percent, according to Hedge Fund Research’s HFRX Global Hedge Fund Index.
    Crude oil for August delivery rose 95 cents, or 1.3 percent, to $76.96 at 10:17 a.m. today on the Nymex.
    Net-long positions among hedge funds and other large speculators in crude oil futures and options combined on the Nymex rose to 84,455 for the seven days ended July 13, according to the CFTC data.

    Slowing Economy

    The Thomson Reuters/University of Michigan consumer sentiment index for July fell to 66.5 from 76 in June. The Federal Reserve Bank of New York reported July 15 that its general economic index dropped to 5.1 in July from 19.6 the prior month. The Federal Reserve Bank of Philadelphia’s general economic index declined to 5.1 this month, the lowest level since August 2009, from 8 in June.
    Stocks dropped on the slump in consumer confidence and lower-than-estimated revenue at companies from Bank of America Corp. to General Electric Co. The Dow Jones Industrial Average declined 2.5 percent July 16 to 10,097.90. The Standard & Poor’s 500 Index slipped 2.9 percent to 1,064.88.
    While bets that oil will rise may bring returns in coming months, it’s unlikely to be anytime soon, according to a Bloomberg News survey. Thirteen of 33 analysts polled, or 39 percent, forecast crude will decline through July 23. Twelve respondents, or 36 percent, predicted that futures will be little changed and eight saw an increase. Last week, 53 percent of analysts forecast a gain.

    ‘Low Base’

    Speculators have pared bullish bets on oil by 56 percent since April, when crude traded at this year’s high of $86.84 a barrel on the Nymex. Net-long positions in futures and options combined fell to 50,503 in the week ended July 6, the lowest level in more than a year.
    Last week’s “low base” exaggerated the significance of this week’s jump in bullish bets, said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
    “Most of the money is really on the sidelines, we just don’t have big bets in these markets right now,” he said.
    Markets may “chop sideways, possibly for years,” he said.
    Crude will have to break out of its range in order to entice managed money back into the market, said Khan at Schork Group. Oil has traded mostly in an $18 band since August, making it hard for speculators to turn a profit on crude, he said.
    “We’ve been unable to break below $68 or above $86,” Khan said. “The buy-and-fly mentality just isn’t working in equities and it isn’t working in crude.”
    The CFTC publishes aggregate numbers every Friday for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves.

98. If you want a play in tankers and have a 2 or 3 investment horizon this looks interesting

    nna

    http://finance.yahoo.com/news/Navios-Maritime-Acquisition-prnews-2528518187.html?x=0&amp;.v=1

99. Thanks Bill, do you have a favorite LNG tanker name?

100. I’m bummed about the SSN deal since I bought shares on the 18th, but they didn’t settle until the 21st…1 day too late. I just wish Schwab could have given me that explanation without me having to be on hold for a combined 2 hours with 4 different customer reps.

101. HAL – flatlining at 28.90 along with this bored to tears market. With my two trades I’m flat on the day, may add more later in the week.

102. #100-I feel your pain-same w/me-TD Amer processed my order, said no problem because it was past their self-imposed deadline, and then came back a couple of hours later, said whoopsie, I did not qualify because I did not own the shares by deadline date, ie one day too late-heh.

103. Z, BOP-thanks for your comments Fri afternoon after I went off the rails-could not type Fri with too much smoke coming out my ears, after mkt (portfolio) meltdown, Afghan news.

104. Eyes open for the next single digit midget play. Being pretty choosy. Am impressed with the level of detail and the style of the writing in the VYOG but management there gives me pause in terms of their lack of experience aside from the land man now partly in charge.

105. 99.. no i dont

     im not aware of any names that specialize in that sector except one small player and that name escapes me at the moment

106. Z, do you follow or have you followed COT, ATLS0-Stifel analyst thinks highly of them, I believe you and BOP seem to think he knows something about the energy (NG) sector.

     Thanks.

107. s/b ATLS in #106

108. @###-

     #106 boloxed up-symbols s/b COG, ATLS

109. Expect to see an @NFX any day now through Friday when they report. Looking for more Granite Wash results and an update on the Woodford as always (pad efficiencies, super long lateral results) and better insight into timing in Montana as they go where only ROSE has gone before (and only part way at that). Should be little to talk about on the Deep Water front in the U.S. Not playing with options at the moment as I don’t like the feel of the broad market. More comments on them a little later in the week.

110. Choices – I’m not the guy to ask on either name, can dig if you like. COG, good set of assets, a bit of trouble in the Marcellus awhile back. ATLS – I have looked at a few times but not kept up with the story.

111. Tom – any final thoughts re NE before the close?

112. Z: Since the deal was well known, I will have to guess the numbers will be lackluster given the recent price weakness. I’m still sticking with $1.08/sh. After CC I will pass along thoughts. Also a summary of the sell side concerns.

113. Z; Hows this for out of the box thought. The EFS has “jumped the shark”. During the Haynesville hype and decline as it got drilled out maybe the game changing label that CHK put on was very self serving. Has anyone other than EOG called EFS a real game changer? Has the price per acre still been rising? HK and even EOG seem to either have technical selling or something other. Just trying to raise some discussion.

114. Bill, all the Navios relationships are confusing. What is the connection between NM and NNA in the link? Or with NMPartners? etc.

115. Tom – gotcha, sorry for the delay, had to quell a minor intern uprising.

     Re the Eagle Ford, by the jumped the shark do you mean that being there and enjoying those kind of returns is no longer that big a deal to the market? If so, I’d say that the market is asleep at the moment, same with Bakken and with Marcellus. In terms of economics, those 3 and the some parts of the Tx and Ok panhandle wash plays represent the most attractive returns at the moment. EFS is very important to HK, PXD, ROSE, SM, APC, SFY … right now market just doesn’t care but if you look at the flow of rigs and materials you are seeing EFS continue to heat up with Haynesville moving more sideways with lower gas prices.

116. NG gave up small gains to go to small losses earlier as a wave south of Cuba went to a 0% chance of development this morning, so traders are keying off storm watching and not the heat in the U.S. I’m pretty OK with that for the moment since it sets up an easy run, depending on where the Street comes out on estimates for storage this week and next.

117. 99, 105: Golar (GLNG) and Teekay LNG (TGP) are two that I remember. haven’t look at either in over a year

118. 114

     nm is a holding company mostly dry bulkers but they sponsored and own a portion on NMM and NNA

     NM= Holding company, 5 % dividend

     NMM also is bulkers with a big dividend
     NNA is in tankers no divy = growth story

     Kinda like FRO and SFL

     Right now , people are paying up for dividend paying stocks and dont like growth

     Example

     Line has triple from lows
     HK down 70 % from highs\

     So Nm drops assets down to nmm. The asset is a long term lease and high payout is achieved. Thats drives price up and then NMM sells shares and repeats the process

119. NM is in Chile??? How is that working out?

     I take it from your comments that you think it is a buy down here.

120. On Tankers

     Scott Burk: The supply/demand balance in the tanker market continues to be determined by the
     interplay of several factors: rate of recovery in global oil demand, orderbook deliveries and the phase-out
     of single-hull vessels. Regarding oil demand outlook, the latest forecast from the IEA calls for world oil
     demand to expand by 1.6 million barrels per day (Mbpd) in 2010 and 1.7 Mbpd in 2011, representing
     growth of 1.9% and 2.0%, respectively. We note that the agency had lowered its 2010 oil demand
     forecast earlier this year, as the global outlook has worsened amidst concerns of a double-dip recession,
     slowhing growth in China and sovergn debt issues in the Eurozone. We do not expect significant OPEC
     production increases until possibly late 2010, as crude inventory levels in OECD nations remain elevated.
     In future years, we expect a greater percentage of oil shipments to be moved by sea with increased
     distances, and thus apply a ton-mile multiplying factor of 2.6x to our oil demand % growth forecasts. This
     leads us to forecast crude tanker demand to increase 4.9% in 2010 and 5.2% in 2011

121. Bill, thanks for the insight. Its a little convoluted to my eye, but who am I to say when it come to shipping deals. I own NM and took a beating on my shares. I’m sticking with the plan however.

122. Just would note that 9 times out of 10, the IEA is too bullish with their demand forecasts and end up pulling it back. OPEC is quite a bit lower for both years and over time I’ve noted that the number falls somewhere in between.

123. Z – Thoughts on timeline for those HAL calls? Any catalysts you can see?

124. ZMAN – How about taking a hard look at RAM energy – gotta be good.

125. Z: The jumped the shark reference comes from TV land. When a show is popular and then is not, it is said it has jumped the shark. Originally came from an episode of Happy Days. Thanks as always for your answer.

126. BG 39

     Good question. A couple of days to two weeks. Tomorrow could see EPS estimates rising officially and perhaps a target price bump or two on the part of the Street. Over the next couple of weeks, progress by BP should be helpful to a higher HAL price as well. Month by month going forward, I don’t see a near term rollover in either the gas directed rig count or the horizontal rig count in the states. So NAM looks pretty swell for them (outside of the Gulf and the Gulf should be in everyone’s numbers by the end of the week). International is a bit slower to ramp than expected or management is being conservative. SLB’s call on Friday will probably play out as them too seeing the international side moving a little slower (as they are more conservative guys on a CC than the HAL guys). This could be a reason to take profits or change strategies by Thursday afternoon.

     Also, I owe you an email. OK if I address those questions in the mailbag for tomorrow’s post as they were general options issues?

127. 124 – Not a fan of REXX. Yes Niobrara but they paid up and otherwise, never got all that hot on them, always a bit hypey to me. Good energy savvy guy the other day said much the same but then added that he is looking too now so it’s on my todo list.

128. That works for me. HAL on the move big this afternoon.

129. Not REXX, RAME 🙂

130. re 128. Yeah, market helping. Part of the reason I dollar cost average into that kind of post news trade is that you may be catching the initial wave at it’s peak or only half way up, so I stage into most positions and bang out a bit harder on the exit. My bad timing on letting the July calls get crushed for no good reason last Friday other than expiry games.

131. #125-Tom-nuking the fridge also works.

132. Z – re 115: NFX in the EFS also, rigs AND frac crews headed that direction.

133. nm is in Uruagy not chile

     NNA is up 4 % on 9,000 shares

     no float obviously

134. K bookie Paddy Power is paying out on the wager that BP CEO Tony Hayward will step down before the end of the year.

     More than 500 bets were placed with Paddy Power (www.paddypower.com) on Hayward not to be CEO of BP on Dec. 31. This forced his odds down from two-to-one to one-to-five. Hayward’s fortunes — at least in the eyes of those willing to wager — were beginning to turn last month

     “Punters seem in absolutely no doubt that Tony Hayward’s days as boss of BP are numbered,” Paddy Power said Monday. “We’ve taken over 100 bets on Hayward to go in the past five days alone and not one single bet on him to stay. It’s game over as far as we’re concerned and we’ll be paying out from today.”

     Paddy Power continues to take bets on the next CEO of BP with American Rob Dudley replacing Englishman Iain Conn as favorite. Dudley, who was assigned by BP to lead the Gulf Coast Restoration Organization, has seen his odds slashed from 10-to-one to seven-to-four favorite following significant betting supporting the 55 year-old executive, Paddy Power said.

     Tied with Conn at four-to-one odds is former BP CEO John Browne.

135. BG 39 – Thanks need to go back and review my notes, don’t recall results in the EFS from those guys. Hear ya on the AND. One without the other is less than helpful these days.

136. U.S. natural gas prices will average $5.00/MMBtu at the Henry Hub over the next five years, which is about 18% lower than the average price currently reflected by the New York Mercantile Exchange futures strip, Bentek Energy LLC said Monday.

     “Improvements in drilling and completion techniques by many North American producers have been impressive. We’ve seen unprecedented growth in unconventional gas production, which has spawned significant pipeline construction and other infrastructure projects. These developments have altered gas price relationships across North America,” said Bentek Managing Director Rusty Braziel. “We expect these trends to continue over the next five years. And while we see substantial demand growth ahead in the power sector, demand increases will not be enough to offset supply growth.”

     Bentek’s forecast covers 2010-2015. Over the previous five years gas prices averaged $7.06 at the Henry Hub, the firm noted.

     “The Nymex futures strip through December 2015 currently averages $5.76,” Bentek said. “The futures market has not fully adjusted to the fundamental changes that are expected to take place.”

     Producers will continue to drill in order to hold their leases — despite low gas prices, Bentek said. This should drive gas production higher through next year. In 2012 Bentek expects that drilling to hold production will taper.

     “Production is projected to grow 4.6 Bcf/d between 2010 and 2015,” the firm said. “Risks to this growth include potential regulations imposing more stringent safety and environmental measures on drilling.”

     Canadian imports will continue to decline — from 6.9 Bcf/d this year to 5.8 Bcf/d in 2015 — as Canadian gas gets pushback from Lower 48 shale plays and as Alberta soaks up more domestic gas in aid of oilsands production, Bentek said.

     Liquefied natural gas (LNG) imports to the United States will remain weak at about 1.5 Bcf/d on average over the five-year period, Bentek said, as Asia, Europe and other seasonal markets increase takes and domestic shale gas keeps U.S. demand sated.

     According to Bentek, the power generation sector is poised for a structural shift as natural gas begins to capture market share from coal. An extended period of abundant gas supply at lower, stable prices is likely to lead to a new period of gas-fired power generation growth. Demand for gas among power generators is projected to grow to 21.4 Bcf/d in 2015 from about 20.3 Bcf/d this year, Bentek said. “That is only 1.1 Bcf/d of growth over the next five years compared to 3.2 Bcf/d of growth between 2005 and 2009.”

     Bentek’s gas-fired power forecast is based on currently planned capacity additions, projected load factors and coal-to-gas switching.

     “If gas prices remain low over the next two years, contrary to the current futures strip, gas-fired power additions are likely to increase even faster, so there’s a significant risk that gas demand from power will be greater than the base-case forecast,” Bentek said.

     Economic recovery should drive industrial demand growth of about 1.5% per year through 2015, Bentek said, while residential/commercial demand is projected to grow 0.2% per year due to population growth and fuel-switching, offset by conservation and efficiency improvements.

137. Bill – bt some NM at 4.95. Thanks for your help.

138. re 134. What I really want to know are the odds on Boxer and Pelosi.

139. as z poimted out earlier today horizontal rigs are at a record high/..

     i dont understand why these guys keep drilling non stop shooting themselves in the foot

     They need to do a trade off between holding leases and $4 ng

     alot of hedges are rolling off, sd has 0 next year, chk hedges are rolling off, some serious pain could be coming

     where are the hurricanes?

140. Apache’s Shallow-Water Gulf Drilling Request Approved: WSJ Link
     2010-07-19 19:11:14.12 GMT

     http://online.wsj.com/article/SB10001424052748703720504575377322984605424.html

141. 138 lol

     good one

142. re 135: Correct, no results out to date.

143. gas and electric utilities should be making money hands over fist with the heat wave

144. they have even odds for the house

     http://www.paddypower.com/bet/politics/other-politics/us-politics?ev_oc_grp_ids=240441

     control of senate

     rebuplican long shots at 2-1

     http://www.paddypower.com/bet/politics/other-politics/us-politics?ev_oc_grp_ids=240440

145. Okay the area I am now watching is around 1080. If we move above there then likely the low is in. If we stall at or just below then chances are we have another move to the downside which ‘should’ target the 1050 – 55 area. IBM after the bell…..

146. BOP – thank the powers that be for small favors.

147. Thanks again Nicky, glad you are back from vacation, keep it coming, spot on for about 8 weeks straight now by my count.

148. next president at 1000 to 1

     Laura Bush and paris Hilton

     http://www.paddypower.com/bet/politics/other-politics/us-presidential-election-2012?ev_oc_grp_ids=88234

     they have barry as the favorite to win

149. #140 — there is no way that should make headline news. Kinda pathetic, really.

150. Estimate on what the drilling moratorium has cost, in terms of money and jobs.

     http://www.epmag.com/2010/July/item63533.php

151. BP getting hammered.

152. BP down 6.4%.

     Whitehouse says well leaking 2 miles away. Also leaking from top of well.

153. Uh-oh…

154. Was talking to a drilling contractor today and he was saying he is getting daily calls from South Louisiana for drilling hands and full crews looking for work.

155. Might pick up more in anticipation of the relief well. This is another pick up point.

156. It’s been down all day on the seep story. Two miles away adds a degree of “can they plug it or not”. Pressure was still rising so wondering if it is much of a leak. If it is then I’d bet they make them uncork it and begin siphoning until the relief well hits.

157. #138

     http://www.intrade.com/#

158. BG – yeah, just wondering if this downgrades the chance for being able to kill it. I’d think not unless it is very large leak that mud and cement would jut be lost into. But given that the pressure has not dropped but is still rising I don’t know if that’s possible. But, I’m no engineer and I don’t play one on the internet. I’ve got a note in with a completion engineer on the matter.

159. Also adds a degree of “are they even sure it’s from this well” to the mix.

160. The stuff they’ll probably use to kill this well is nasty, toxic, extremely heavy mud. I can’t see them not being able to kill it from the depth they’ll be entering at, even if the wellbore is compromised somewhere uphole.

161. CAM getting a nudge, up 4.4% in a lousy mkt.

162. BP BP says seabed seepage is unrelated to the Macondo well – Reuters ($34.81 -$2.29)

163. Now it’s rallying.

164. Didnt Matt simmons predict seepage and top well problem

165. 131 Hadn’t heard that one

166. Gulf Oil Spill May Cost 17,000 Jobs, Moody’s Says (Update1)
     2010-07-19 17:45:50.271 GMT

     (Updates with quote from report in fourth paragraph. For more on the BP oil spill, see {SPILL }.)

     By Simone Baribeau
     July 19 (Bloomberg) — BP Plc’s oil spill may cost the U.S.
     Gulf Coast region 17,000 jobs and about $1.2 billion in lost economic growth by year-end even if the flow is stanched permanently next month, Moody’s Analytics said in a report.
     Under a more pessimistic scenario in which the oil spill continues through December and President Barack Obama’s six- month moratorium on deepwater drilling is extended, economic losses may reach $7.4 billion, and more than 100,000 jobs would be lost, Moody’s said today in a report written by Marisa Di Natale, a director based in West Chester, Pennsylvania.
     Louisiana, with its heavy dependence on fishing, aquaculture and oil extraction, and Florida, which relies on tourism, are likely to be hardest hit by the spill, the report said. Outside the five-state Gulf region, which also includes Texas, Alabama and Mississippi, the spill’s impact is likely to be negligible, according to the report.
     “We’re talking about a very localized impact,” Di Natale said in a conference call after the release of the report. “We don’t think there’s going to be a major impact when we look at the national economy.”
     The Moody’s forecast assumes the well will continue to leak until early August, when two relief wells stop the flow permanently, and that none of Florida’s Panhandle beaches will be closed as a result of the spill.

     Obama’s Moratorium

     The report warns that the six-month moratorium on new deepwater oil-drilling alone may cause more job losses than the spill’s direct impact on Florida tourism.
     The oil leak may potentially be stopped sooner than Moody’s baseline scenario. BP Plc halted the flow of oil from the well for the first time July 16 and was given permission earlier today to keep the well closed for another 24 hours.
     A separate, industry-funded report released today also warned of the impact of the moratorium on new deepwater drilling, saying it is “crippling the local economy” and may cost the region 8,169 jobs and about $2.1 billion in economic losses in its first six months.
     The study, commissioned by the American Energy Alliance, the advocacy arm of the Institute for Energy Research, a Washington-based research group, predicted that nationwide job losses will reach 12,000 in six months, costing the U.S. economy about $2.8 billion in lost growth and $219 million in tax revenue.
     “The moratorium could be more costly than the oil spill itself,” Joseph R. Mason, author of the study and professor at Louisiana State University in Baton Rouge, said in a release accompanying the report. “By stifling one of the area’s primary economic engines, the administration is crippling the local economy and risking long-term consequences.”

167. re 164: haha, Matt Simmons. He also said they’d be bankrupt in one month — 2 months ago.

168. Re 160. Agreed, I think it is setting up a nice entry point as well, just crossing i’s, dotting t’s and already long a little.

169. re 159. I don’t see the ROV feed that is monitoring this one. Don’t laugh but it could be a natural seep. There are thousands of them out there. If any gets eyes on the camera with that feed let me know which one it is.

     Bill – he said the hole was so wrecked they would not be able to kill it, we shall see but I think he is wrong.

170. Also, lending to the BP comment re it being a natural seep, 2 miles away on a well that is two miles into rock and a fairly straight shot down? Just don’t think that’s going to fly.

171. Re 169, if the hole was that wrecked, wouldn’t the pressure test have shown it by now?

172. AAA – I would say so, but again, checking with guys who know for sure. TEXW, Reef, Wyo, feel free to chime in on that.

173. This guy sounds more like a hero to me than someone who should be facing criminal prosecution. Of course, RIG didn’t kick into the obama slush fund and probably didn’t do a lot for his campaign funds either.

     If anyone is facing criminal prosecution, how do the BP guys on the righ escape it? http://www.bloomberg.com/news/2010-07-19/deepwater-horizon-rig-captain-may-face-criminal-investigation-lawyer-says.html

174. Beerthirty.

     I guess some break in the casing could be leaking at a point where a non sealing fault carries the oil at a 45 degree angle up through over 2 miles of rock. Hmmm. Nah, probably not.

175. Z – re 169 – seconded.

176. bp’s bop was sent to china for an overhaul saving a few bucks

     http://www.guardian.co.uk/environment/2010/jul/18/deepwater-horizon-blow-out-preventer-china?

177. t is understood that lawyers for Cameron International, the manufacturer of the BOP, will argue the device was so significantly modified in China that it no longer resembled the original component, and that Cameron should therefore not be held liable.

178. I have seen surface seeps on a blowout but it was an open hole well, not cased very different and only about 100 yards from the well 2 miles is a long way

179. There is no seep coming from their well 2 miles away, and had I known that news earlier in the day caused the 6% tank in their stock, I’d have been quicker to pick up calls. No chance it’s from the Macondo

180. I can accept that a seep two miles away has nothng to do with Macondo but why didn’t anyone notice it sooner?

181. giddy up

     climate change coming

     http://www.accuweather.com/blogs/news/story/34217/oil_spill_threatened_by_possib.asp

182. re 179. Yeah, knew about the seep last night but no one was saying how far from the well it was. I mentioned it in the post and BP was told to investigate it further by Washington. So they do that and determine it is not theirs and I’m sure told the White House that and then you have the press secretary tell everyone the well is leaking two miles away. This have been very typical of the WH way of dealing with BP. Within minutes you have BP on the wire saying that “scientists have confirmed it is unrelated to Macondo”. I’m sure they told Washington that. Not something that got lost at the end of an email either but in big bold letters. These guys in DC just decided to lie.

183. Re 106 [ATLS]
     ATLS does have an interesting ACE up its sleeve. They hold the largest shale posistion in the State of Michigan via their poistion in the Antrim Shale. It seems that underlying the shallow Antrim Shale is a deep shale [Collingswood] which has recently been bid up to around $5,000~$6,000/acre in a recent state auction based on early eploration well results. ATLS has yet to drill up any of their Collingswood Shale, however, their experience in the Marcellus may serve them well to eploit their dominant leasehold position in Michigan…….but this is yet to be proven up…………so it is not valued very highly. ATLS also has lots of gahtering infrastructure in Michigan.

     In general, ATLS tends to disappoint, and being so ‘GASSY’ are tied to the NG price dilemna. Their Marcellus position (which they inherited from their large postion of shallow shale wells in PA has not done much for the share price…..even after they monetized a significant portion of the postition in the JV with Reliance.

184. NE reporting $0.85, looks like $0.93 if you back out a charge and reverse out an unexpectedly high tax rate. Still, that’s well short of $1.05 the Street was looking for. Revenue was $710 mm vs $771 mm so light on the top too. Stock being taken to task in the aftermarket. RIG, DO, ESV, PKD, ATW and to a lesser extent RDC probably go on sale in the morning.

185. re 180: probably because nobody was looking for oil seeps a week ago

186. BedTime Market Strategist
     ——————————–

     So Much For the Bottom Line.

     The earnings reports from IBM and Texas Instruments cemented the theme for Q2 2010 earnings season – bottom line beats on earnings and top line revenue misses. It does make one wonder what was going through the minds of corporate managers failing to communicate the sales misses. Granted, the misses are slight so maybe it was a close call as to where the numbers would land as the quarter drew to a close. Maybe they thought the big earnings and great margins would score points with investors. Regardless, managers have lost the psychological benefit in the minds of investors of good bottom line results. Obviously the first response to any type of shortfall is the “shoot first selling” that has been occurring in the market place. Then what? Despite the revenue misses, are investors going to continually sell cheap stocks simply because they are cheap? Why? To favor the low yields of cash, or bonds or instead to purchase another inexpensive company equally as susceptible to these prevalent revenue shortfalls? For sustained selling to be maintained, investors will have to believe that a double dip in the economy is likely and that this is a peak in earnings being registered. It is hard to believe that just over a year removed from an environment where the financial and economic world was ending that an earnings peak is being registered. It is also worth noting that companies are not providing earnings warnings for the out quarters.

     Overall, it was a quiet Monday with volumes down 25% from Friday’s expiration session. The lack of enthusiasm among investors for earnings reports is keeping the pressure off investors from participating. It appears many investors are defensively positioned and are very comfortable watching from the sidelines and have those feelings confirmed every time a company trades down following a report. As a result, it feels like August in July and it will take a divergence from this earnings theme to break the monotony.

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