20
Jul

Tuesday Morning Pause

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Market Sentiment Watch: Confused, dazed, directionless, but hyper sensitive with more than a touch of negativity. So just like the last several weeks. Today's hypersensitivity comes from IBM (better EPS but short on the top line), GS (not the usual big beat), comments from China regarding weak exports to Europe, and worry over sharply reversing housing data. 

Ecodata Watch:

  • June Housing Starts came in at 549,000 vs 575,000 expected and 593,000 last month.  Note to economists, stop just trending your estimates and do some real research or join the unemployed.
  • Building permits actually rose 2.1% after a sharp contraction in May but this was led by multi-family permits. Single family permits fell 3.4% to a 14 month low.

BP Spill Watch: A Tale of Two Leaks

  • Obama and David Cameron sit down for tea today, could be some interesting, more friendly comments out of DC today.
  • One leak at the top of well by all accounts and video footage appears to be very minor. The Fed's are now calling this leak insignificant.
  • A seep 2 miles from the well bore that the White House incorrectly attributed to Macondo late yesterday. The seep is actually naturally occurring.
  • BP was granted another 24 hour extension of their pressure test.
  • Apache talks for Prudhoe Bay are back on. As I said yesterday, "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".
  • BP's operations in Pakistan are now rumored to be on the auction block.

ZComment: I'm going to go out on a limb and comment that the Gulf and Gulf Coast will recover more quickly than most people expect.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – NE earnings, Mid Cap Orange Charts, overnight emailbag watch
  4. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $7,100
    • 71% Cash
    • Yesterday’s Trades:
      • 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.
      • Added another (5) HAL August $30 calls for $0.83 in a volatile broad market with the stock at $28.65.
  • ZIM (Zman Inefficient Markets portfolio)
    • $2,800
    • 33% Cash
    • Yesterday’s Trades:
      • None

Commodity Watch

Crude oil edged up $0.53 to close at $76.54 yesterday, essentially trading with the small swings in the broad market. This morning crude is trading off $0.50.

  • Early Read On Oil Inventories:
    • Crude:  DOWN 0.625 mm barrels
    • Gasoline: UP 1.0 mm barrels
    • Distillates: UP 1.5 mm barrels

 

Natural gas traded down a penny to close at $4.51 yesterday. Traders are heavily engaged in storm watching and of late are seeing little reason to cover the large net short position they now have. We should be in for at least two more weeks of smallish injections and could even tip towards a break-even week if the heat continues. This morning gas is trading off slightly.

  • Tropics Watch: A tropical wave just north of the Virgin Islands and Hispaniola is becoming better organized and is now given a 40% chance of development over the next 48 hours. A second system approaching the Yucatan has become less coherent.  There are a number of links for weather watching on the Weather tab at left. 
  • Imports Watch: up 0.4 Bcfgpd as both LNG (1.0 Bcfgpd last week) and Canadian pipes (7.9 Bcfgpd ) inched up.
  • Frac Attack Watch: A who's who of Big Cap E&P and Majors have been asked to provide details on proximity of wells to drinking water and disposal of wastewater to Waxman's Energy and Commerce Committee. Just make sure you remind them that over 99.9% of what's in the frac is water and sand.

Stuff We Care About Today

Overnight EMailbag Watch:

Wondering a couple things, as I have watched you trade here recently and checked out some of your trades in the near past...

How do you decide how long dated your options will be?  Clearly, a lot of the trades appear to be in the catalyst-driven portfolio, so I suppose there may be no need to pay a date premium if you're expecting a boost in the near term...

ZComment: Obviously, people trade options for a number of reasons. As a hedge, to skim profits off a covered position and thereby reduce cost basis over time and to gain leverage to a perceived move in the underlying issue all come to mind. Primarily I am in it for the latter but before I move on, let me just remind folks about the way I perceive the options trade and a simple rule of thumb I keep. I see options as the icing on my portfolio cake. The main portfolio is stocks and about 85% to 90% of assets are in stocks (just speaking for the equity portion for the moment). The reason for this is that while you can book nice profits in short order in options, you can also get blindsided by a Chinese banker's comments or videos of rioting Greeks, or an ill-timed and erroneous comment from press secretary.  With that in mind, I look to gain leverage to upcoming events (the ZCAT) and my thoughts on valuation imbalances (the ZIM - (inefficent markets) portfolio.  For both of these I am nearly always in the first three front months.

Under what circumstances might you take a longer dated call option?

ZComment:  I very rarely play LEAPs or long duration options. There is a false sense of security that investors get from buying long duration options but if the market goes against you for several weeks at a time or if the volatility of the underlying security changes (read decreases) the long dated options can bite you especially hard as they usually carry hefty premiums and trade with wide spreads.  Refer back to my reason for being in the options in the first place ... leverage. ----

What, if any, models do you generally use to price the options you're getting into?

ZComment:  Though I had options classes in undergrad, and was forced to memorize the Black-Scholes- equation by one well meaning CFA, PHd, CPA holding professor of mine, I find that the real world is better dealt less with the Greeks (although I do watch delta fairly closely) and more with an attempt at understanding what the underlying can do, and needs to do for my trade to work out. The underlying need not be capable of getting to the strike, just making a timely move on it.

Other things you didn't ask about but I always keep in mind while trading options:

1) I never kick myself over taking profits too soon.

2) I accept that a certain portion of my trades will be "scuds" or go to $0.

3) Win or lose, when a trade is done, it's done. I the option symbol off my market watch and punt it from the front of my head. I don't play "shoulda, woulda, coulda". Ever. That's not to say I don't get frustrating. Believe me, that trading problem last week with potential 12+ bagger in 2 hours, going to $0 was frustrating but why hold onto that? Also, if it's a good trade, great. But I don't alter my trading habits (or I really try not to) because I'm emboldened by a big winner.

4) The market does not care what you paid for a stock or an option. This simply means that trying to "get back to even" is a losing game. Again, some go to $0. Others go up 3x or 4x or more. And I try to get enough of the latter to offset the former.

5) I'm not a chart guy. I'm a fundamental observer. I'm a fair hand at reading a chart but there others on the site that are far better than I do that including JB, Nicky, JD and a number of others. I am a believer in the old phrases "fundamentals tell you what to buy, charts tell you when to buy" and "there are a million charts at the bottom of the sea".

Anyway, back to your questions ...

I am looking for a way to leverage up against a near term upward move in BPs stock once their relief well is TD'd.

ZComment: I'm playing with August $37.50s and $40 calls (a bit riskier). They were entered on different days and depending on the news flow I may roll out and up in the next week into the September $42.50 or $45s. As I tell people often, I don't give advice as my licenses to do that are happily expired but this is what I'm thinking about doing. A little less costly route would be to take a vertical spread, say buying the 40s and selling the $45s but I don't do a lot of that myself.

HAL Wrap Thoughts: Strong earnings led to outperformance yesterday, with the stock up 5% vs the OIH at +1.1%. Some more food for thought: Looking over the OIH,  the action very mixed bag yesterday, big Service up with HAL but pretty muted, especially BHI/BJS which I would have thought to be up more. SLB trying to keep up with HAL, WFT up half as much, maybe some trepidation there regarding a potential slow down at Chincontepec. Sounds like that's just that field (which is there big up and coming play to replace the offshore Cantarell) and not the whole of Mexico slowing. Onshore U.S. rig names not getting much of a boost from HAL's comments at all ... could be the comment about things accelerating more slowly or leveling off but they had almost the same sentence in the 1Q pr and it's been strong since then. CLB and CRR largely ignored today but both benefit from increased horizontal drilling, frac size and shaliness (nothing really new there other than it doesn't appear to really be slowing). Would expect very strong quarters for both of those names. Still surprised HAL or SLB has not yet scooped up CLB.

Mid Cap Orange Charts - by request. I'll update the Smalls and Large Caps later this week.

 

Earnings Watch:

NE Reports A Brick

The 2Q Numbers:

  • Revenues of $710 B vs $771 mm expected
  • EPS of $0.85 reported ($0.93 ex charges and unexpected items) vs $1.05 expected

Highlights:

  • Remaining 2010 available days committed: 61%
  • Last quarter this figure was: 55%
  • Available rig days committed for 2011: 35%
  • Still bringing their newbuild 10,000' capable floater to the U.S. Gulf, should get some questions on what they think the startup date will be.

Nutshell: A clear miss. This is not one of the names I play in at the moment but I do keep an eye on them and am mostly interested in the Gomex comments.

Conference Call: Today, 10 am EST.

Earnings Briefs:

WFT Reports Top Line Driven Beat; Not a lot of forward looking comments in the release.

The 2Q Numbers:

  • Revenue of $2.438 B vs $2.37 B expected
  • EPS of $0.11 (ex items) vs $0.07 expected

Highlights:

  • International showed the gains we saw in HAL and are expecting from SLB later this week, with Eastern Hemisphere gains offsetting weakness in Mexico. On the call look for them to get asked to quantify what the directionality is with regards to Mexico at this point.

Conference Call: Today, 9 am EST.

BTU Reports Solid Quarter; Inching Up Guidance on Continued China Strength, Recovery in the U.S.

The 2Q Numbers:

  • Revenue of $1.66 B vs $1.68 B expected
  • EPS of $0.69 (ex items) vs $0.63 expected

Highlights / Management Comments:

  • Guidance gets tweaked higher
  • "International markets continued to strengthen in the second quarter, led by rising imports in China, India and the recovering developed economies in Asia. As a result, Australian thermal coal prices are running more than 40 percent ahead of the prior year and are above the prices at the beginning of both the first and second quarters. And benchmark metallurgical coal prices for the third quarter have settled more than 12 percent above second quarter agreements."
  • "The U.S. market recovery has continued to advance, with electricity generation up for seven straight weeks and coal inventories dropping at more than twice the five-year average pace over the past month."

Conference Call: Today, 11 am EST.

Odds & Ends

Analyst Watch:

  • HAL - RBC hikes target $10 to $45
  • HAL - GS lifts target to $35
  • HAL - FBR reiterates Outperform rating, target $40
  • CRU initiated at Jefferies at Buy with a $22 target

196 Responses to “Tuesday Morning Pause”

  1. 1
    zman Says:

    Analyst Watch:

    HAL upgraded from Outperform to Strong Buy at Raymond James

  2. 2
    zman Says:

    WFT call in 5 minutes, stock higher on their beat, clarity of outlook more important.

  3. 3
    zman Says:

    Buzzword Watch:

    Static Kill – Sounds like a new name for the top kill. BP and Govt. mulling using heavy mud and cement through the BOP to kill the well. Still design stage but sounds like they may try it next week. At this point, I have to wonder why bother and not just intercept from below but again, back up plans are always a good idea.

  4. 4
    BirdsofpreyRcool Says:

    Credit Markets —

    TED still creeping tighter (good). Clocking in around +35.7 bps.

    Investment Grade (IG) and High Yield (HY) CDS indices are both in the red today. But not by an amount that indicates FEAR. That said, credit has been outperforming stocks by a Tour-de-France Alpine Mile over the last few weeks. Money is flowing into corporate bonds (and away from stocks). That is a world-of-difference different than money flowing into US Treasuries. It means the mrkt isn’t in total FEAR Mode, but has a desire to take some risk in order to receive returns that are greater that 0.2% money markets or 3.0% 10-yr treasuries. Some of this risk capital will flow back into stocks, when the smoke clears a bit (and it will clear… someday… it always does).

    IG +1 1/4 bps wider

    HY -3/16 point lower

  5. 5
    BirdsofpreyRcool Says:

    (oops… Alpine not really the right term for the Tour… more like “Pyrenee-ic” Mile, for all you purists)

  6. 6
    zman Says:

    Thanks BOP

    Listening to WFT

  7. 7
    zman Says:

    Analyst Watch:

    HAL – Citi raises target from $34 to $42, rating stays Buy.

  8. 8
    zman Says:

    Analyst Watch

    HAL – Howard Weil ups target from $38 to $46

  9. 9
    zman Says:

    WFT

    3Q look
    NAM to add 2 cents EPS with onshore gains offsetting Gulf moratorium
    East +3 cents (Russia), also strong Sub Sahara Africa
    Latin America – Margin erosion coming from Mexico should be over.

  10. 10
    zman Says:

    Jat – hard to believe I’m contemplating a trade on these guys.

  11. 11
    milepost_43 Says:

    our tax/BP $$ at “work’…boom boom and more boom —

    Just spent 2 days at Indian Pass FL for tarpon with my grandson. This was our 4th year. Weather has been/was bad and the tarpon were NOT biting…but the point of my post is the boom boom and more boom positioned along the beach and back in the bay areas.
    What a joke….
    along one stretch of 5 miles of beach we saw 3 settings of boom about 500′ each plus 2 other lengths of boom washed up on shore…saw a lot of other boom settings and it is hard to describe but there is NO WAY those little boom settings would have any effect IF oil would show up….and so far NO oil….

    Did see a tar ball patrol on Sun….probably at double time pay…quite a sight….about 10 people in white jump suits walking along side by side with a 4 wheeler following with a trailer and 2 porta potties…his and hers I guess…it was followed by 2 pickup trucks one with a trailer….they had just left their “cooling off” tent…..

    Our guide normally works off Grayton Beach–east of Destin but comes to Indian Pass in July for tarpon. Confirmed what I read about the tar ball patrol only working 15 min / hour….said the $$ being spent in his area is unbelievable….said only a few guides are fishing…most working for BP….get $1400/day and has to have a mate on board….said they are just looking for oil…no oil in his area…yet…

    now for the good news…..our guide said the boom has turned out to be the BEST tripletail–a great sport fish on light tackle
    http://www.thejump.net/fishlist/tripletail.htm

    attractant he has ever seen…they hang around any floating “stuff”…I can confirm that statement comparing this trip to our other 3….we will be eating tripletail till our trip in ’11….

  12. 12
    zman Says:

    WFT – Street at 3Q EPS of $0.15, sounds like we are looking at at least that.

    North America – Expect pricing to be constructing.

    Gulf of Mexico – moratorium costs them 1 cent EPS per month.

    Latin America – flat Mex, better Argentina

    Expecting Eastern Hemishphere to continue to improve in 2H10 and into 2011.

    Looking for a stronger year next year.

  13. 13
    zman Says:

    WFT Notes:

    Russia and Mid East will be the strongest performers in 2H10

    WFT is not one of the names I follow as closely in the Service group as others… due to the fact that they habitually come up short on the numbers. This is a more positive tone call than they’ve had in awhile. Q&A starting.

  14. 14
    BirdsofpreyRcool Says:

    EXXI — looks like Schiller fired his COO. Never dealt with Steve Weyel… so don’t really have an opinion. Wonder what he did “wrong,” tho… and uncertainty is never good for a stock.

    Will find out and get back to you.

  15. 15
    zman Says:

    WFT Q&A

    Almost sounding cocky regarding the absorption of fixed costs. OK, call it very confident.

    PEMEX budget increase of 54% for 2011 has been proposed. Hadn’t seen that. WFT saying it doesn’t really matter where the money is focused. WFT says don’t trust the size of that increase and I’d say agreed. They don’t seem to be able to come close to initial spending requests, too many other concerns down there. But it’s good that its in the plus column.

  16. 16
    zman Says:

    Thanks BOP, as long as John isn’t cashing in.

    Wow-ugly open.

    WFT Q&A

    Iraq timing question on awards by Majors to oil service:

    Lumpy and slow, probably 2 or 3 IOC awards this year. It could be more or it could be less depending on the political process/security.

  17. 17
    zman Says:

    SSN queuing up a new recent high at the open, closing on a double on the rights shares.

  18. 18
    VTZ Says:

    Gold bounced near the bottom of my support range at 1175 (which is the last level before a big liquidation) up to the first level of support at 1185 which now looks to be acting as resistance.

    If gold can recover above 1185 and hold this downwards momentum it should be ready for another big move.

  19. 19
    zman Says:

    HAL would be $30 now were it not for a 1.2% down start on the S&P. We’re down into Nicky’s make or break levels.

    V – Thanks. Keep me posted re Gold.

  20. 20
    West Says:

    http://finance.yahoo.com/news/Concho-Resources-Inc-to-bw-683861527.html?x=0&.v=1 ,CXO buys second largest independeent in Southeastern New Mexico, Marbob for $ 1.65 Billion. This will add significantly to their Yeso and Bonesprings acreage. The Yeso is the largest producing interval for CXO. Mostly cash deal, $ 80/acre producing and $ 6 pmcf. Looks like the market will like the deal.

  21. 21
    VTZ Says:

    Well this is one of my buy points… If I didn’t own any I would be buying now… at 1120-1130 or 1080 depending on the momentum and 1044 if it ever falls that low again.

  22. 22
    zman Says:

    Thanks West, thought Reef mentioned Marbob a couple of weeks back.

  23. 23
    crysball Says:

    SSN has 2 wells approved in Drilling Package, 1 more pending:
    Intrepid & Courageous approved, Enterprise is still pending.

    Township 23 Range 63
    Api Rule Status Company Well Name Section Qtr/Qtr Location Status Filing Id
    49-015-20191 325 Approved 07/19/2010 SAMSON OIL & GAS USA INC INTREPID US 22 STATE 1-16H 16 SE SE 300 FSL and 300 FEL WP
    49-015-20190 325 Received 07/08/2010 SAMSON OIL & GAS USA INC ENTERPRISE US 27 ST 1-36H 36 NW NW 301 FNL and 297 FWL WP
    Township 24 Range 63
    49-015-20189 325 Approved 07/19/2010 SAMSON OIL & GAS USA INC COURAGEOUS US 26 ST 1-16H 16 NW NW 300 FNL and 300 FWL WP

    This should help sentiment they will receive toward the side of the sale.

  24. 24
    zman Says:

    HAL and WFT pushing higher.

    Interesting to see the bottom fishing in NE, had expected a full day’s swoon. That call up next.

  25. 25
    zman Says:

    Thanks Crys, I don’t have the coordinates on those at hand, I take it they are Goshen county wells?

  26. 26
    jat Says:

    Re 9,lol, I felt the same way after they came through nyc in early July… a lot of peers started putting relative longs on after that.

    I’m already huge in HAL and SLB. I feel good about the near term for WFT but still worry that overall 2011 consensus could be too aggressive. All depends on the Q4 print.

    This Mexican commentary is more constructive than what I thought it’d be after listening to the HAL bash yesterday.

    WFT and FCF don’t typically jive.

    They are sandbagging Q3. Makes sense as prior to today they’ve missed for ten years, and they just hired Karen Green from Opco to be the USA IR face. They’re trying to keep expectations down and Bernard/Andy have been making large efforts to muzzle themselves.

  27. 27
    RMD Says:

    CXO sold 6.6mm shares in a private placement as part of the deal at a 15% discount to the closing price; does this discount seem high? (Discount is higher if you use the average close over the last 2 weeks.)

  28. 28
    crysball Says:

    SSN has a lots on the Bakken Plate. Following is an pulled from the July 28 North Dakota Oil/Gas Hearing Docket Agenda:

    https://www.dmr.nd.gov/oilgas/dockets/20.

    NDIC Docket for Wednesday, July 28, 2010

    “Case No. 12950: Application of Zavanna, LLC for an order pursuant to NDAC § 43-02-03-
    88.1 pooling all interests in a spacing unit for the Gary #1-24H, Section 24,
    T.154N., R.99W, Stockyard Creek-Bakken Pool, Williams County, ND;
    and also to consider a petition for a risk penalty requesting an order
    authorizing the recovery of a risk penalty from certain non-participating
    owners in the drilling and completion of the Gary #1-24H well as provided
    by NDCC § 38 08 08, and such other relief as is appropriate.

    Case No. 12951: Application of Zavanna, LLC for an order pursuant to NDAC § 43-02-03-
    88.1 pooling all interests in a spacing unit for the Hanson 28-33 #1H,
    Sections 28 and 33, T.154N., R.99W, Stockyard Creek-Bakken Pool,
    Williams County, ND; and also to consider a petition for a risk penalty
    requesting an order authorizing the recovery of a risk penalty from certain
    non-participating owners in the drilling and completion of the Hanson 28-
    33 #1H well as provided by NDCC § 38 08 08 of the NDCC, and such
    other relief as is appropriate.

    Case No. 12954: Application of Samson Resources Co. for an order pursuant to NDAC § 43-
    02-03-88.1 pooling all interests in a spacing unit for the Hanson #17-20-
    163-98H, Sections 17 and 20, T.163N., R.98W., Blooming Prairie-Bakken
    Pool, Divide County, ND as provided by NDCC § 38-08-08, and such other
    relief as is appropriate.

    Case No. 12955: Application of Samson Resources Co. for an order pursuant to NDAC § 43-
    02-03-88.1 pooling all interests in a spacing unit for the Antonson #01-12-
    163-95H, Sections 1 and 12, T.163N., R.95W., Forthun-Bakken Pool,
    Divide County, ND as provided by NDCC § 38-08-08, and such other relief
    as is appropriate.
    Listen to the hearings live: https://www.dmr.nd.gov/oilgas/ Page 19 of 21

    Case No. 12956: Application of Samson Resources Co. for an order pursuant to NDAC § 43-
    02-03-88.1 pooling all interests in a spacing unit described as Sections 2
    and 11, T.163N., R.95W., Forthun-Bakken Pool, Divide County, ND as
    provided by NDCC § 38-08-08, and such other relief as is appropriate.

    Case No. 12957: Application of Samson Resources Co. for an order pursuant to NDAC § 43-
    02-03-88.1 pooling all interests in a spacing unit described as Sections 15
    and 22, T.163N., R.95W., Forthun-Bakken Pool, Divide County, ND as
    provided by NDCC § 38-08-08 and such other and further relief.

    see pages 6 & 7 and 19 & 20 of Docket Agenda

  29. 29
    jat Says:

    Wow, didn’t even see Marbob this morning but there’s been speculation last two weeks. Thought they’d issue more equity.

  30. 30
    crysball Says:

    Anyone familiar with Ancschutz Drilling……thay seem to have a lot of activity in the ND Bakken drilling…are they a priviate company?

  31. 31
    zman Says:

    Jat – thanks, mulling a quick trade, sounds like EPS slight boost, but more of a comfortability call for analysts. Absolutely agree re your Mexico comments.

    RMD – I would not expect them to price 15% into the hole, no, that’s high. Not really sure what it tells me other than they thought they couldn’t get it done otherwise… could be reflecting their sentiment on the group right now.

  32. 32
    zman Says:

    re 30, yes, been around forever, deep pockets.

  33. 33
    zman Says:

    NG up on storm watch, possible spinner by the weekend as Bill mentioned last night.

  34. 34
    zman Says:

    WFT

    2010: $0.51 now, probably going to $0.60- $0.65

    2011: $1.16 – agreed, probably full for now.

    Stock still fairly inexpensive.

  35. 35
    bill Says:

    Ng stocks bounced back from fresh lows made this am

    Can we call this the low? I dont know but Id like to say yes

  36. 36
    West Says:

    On the CXO deal DVN also made a proposal to Marbob, which raised CXO original offer. This is a perfect fit for CXO and they have an additional 2300 id drilling sites in Yeso and Bone Springs. XEC has very large Yeso and Bone Springs acreage positions in these same areas, getting some good pin action today.

  37. 37
    bill Says:

    Its nice to get reaquainted with your weather links

    look at this one from july 1 to present for 2010 and 2009

    http://www.ncdc.noaa.gov/asos/?map_type=avgtemp.dfn&format=.cont&begmonth=7&begday=1&endmonth=7&endday=26&years%5B%5D=2009&submitted=Animate+Selection#instructions

  38. 38
    zman Says:

    Bill – I wouldn’t go that far. Volumes pretty pathetic. Market focused on big name non energy stocks this week. Next week things could/should get more interesting. A spinner would likely give you a good quick pop though, but maybe not the low.

  39. 39
    zman Says:

    Re 37. Yeah, that’s a nice one, I use this one I think you pinpointed last year and which is the 4th link on the weather tab. I like the dots.

    http://www.ncdc.noaa.gov/asos/?map_type=avgtemp.dfn&format=&begmonth=6&begday=20&endmonth=7&endday=26&years%5B%5D=2010&submitted=Animate+Selection#instructions

  40. 40
    zman Says:

    ZTRADE – ZIM – WFT

    WFT – Added (20) WFT $17 August Calls for $0.22 with the stock at about $15.60. I had a bid put in under the market during their conference call and just filled. The call went well, for once, after they beat and numbers for 2010 should be going up. Mexico flattening going forward is better than the Street could have been thinking going forward and NAM and East Hemishpere have pretty strong momentum. On the option choice, delta on $17s and $18s resulted in the same gain on a $1 move so I went for the lower strike but less calls. See today’s post for more comments.

  41. 41
    BirdsofpreyRcool Says:

    HeadTrader pointing out that as low-volume as this feels, volume is actually about 30% higher than this time y’day. He doesn’t see much push behind the bounce off the lows… but he thinks if we start to head down again, we could see volume accelerate.

  42. 42
    zman Says:

    Thought on WFT is that it will at least make a run on its 200 day average on upward earnings revisions and less negative/more positive comments from the Street in the next coupla days, which takes it about a dollar higher and would yield something close to a double in that strike.

  43. 43
    zman Says:

    re 41. Well that’s cheery.

  44. 44
    zman Says:

    BP turning green as Govt plan to blame them for natural seeps fails in committee.

  45. 45
    zman Says:

    SSN a double on the rights shares now. The prudent course of action would be obviously to kick some of those over the side.

  46. 46
    zman Says:

    Not able to listen to the NE call.
    Will be on the BTU call at 11 am EST.

    Analyst Watch:

    HAL – Stephens took their numbers

    from $1.57 and $2.20 for 2010/11

    to $1.92 and $2.52.

    Street is at 1.47 and 2.10,

  47. 47
    jat Says:

    Am hearing that more than one poor soul was short CXO in anticipation of their raising equity.

  48. 48
    zman Says:

    SSN volume high for this time of day. Still not being flipped, up 11%.

  49. 49
    zman Says:

    HAL breaking through it’s 200 day today after stopping there yesterday. JB, any new thoughts?

  50. 50
    Jerome Blank Says:

    RE: #49, HAL…looks good, $29.35 is now the support zone to watch on pullbacks…

  51. 51
    zman Says:

    JB – thanks, where do have resistance? 31?

  52. 52
    Jerome Blank Says:

    Re: #51, HAL, next resistance is a bit tougher from here, HAL is now trading right below the 200 week SMA, which is just above above us here at $30.18, if HAL gets above this level, looking at the P&F chart, next major resistance appears to be closer to $32…

  53. 53
    zman Says:

    For those new to the site you can see all of JB’s chart work, mostly in the Point and Figure realm, here:

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

    Good, helpful stuff and there is a place to vote for him at the bottom of the front page of that link. Just did.

  54. 54
    zman Says:

    JB – thanks. If you look at the 7X column on your first HAL chart, we’re 2 shy of tying the start of the last O column. Think we extend beyond that on this run? By the way, I show the 200 sma at 29.42 on the daily.

  55. 55
    Jerome Blank Says:

    RE: #53, Zman, thank you….

  56. 56
    andy Says:

    bop – PAYD getting hammered today. u still there?

  57. 57
    BirdsofpreyRcool Says:

    andy — PAYD yes. Still in up to my neck. Waiting on lawyers and meetings to take place. Like a lot of other things these days.

  58. 58
    zman Says:

    My last free posts on SSN:

    http://seekingalpha.com/instablog/53637-zman/81761-ssn-announces-subscription-rate-still-awaiting-acreage-sale-finalization

    I’m probably going to take some off the table soonish and buy it back if there is a pullback pre deal on the 26th.

  59. 59
    BirdsofpreyRcool Says:

    PAYD — when I threw out that name, we all thought we were close to closing on a deal. Literally, just a day or two. Turns out, our Legal Eagle had to do a little more work. And “living on lawyer time” seems to take place in a parallel universe.

  60. 60
    Jerome Blank Says:

    RE: #54, HAL…prints a new P&F buy signal if HAL can get to $33, but odds of making it are for sure tied to the macro picture, S&P…

  61. 61
    zman Says:

    Roger that JB. Thanks much for the chart work you do.

    BTU call in 10 minutes.

    Tom – if you have notes to share from the NE call please do.

  62. 62
    zman Says:

    JB – also noted that WLL is not far from printing a new PF buy signal. Still cheapest Bakken name, should be some interesting things to talk about in their newer Three Forks play to the south of most other players (Lewis and Clark). Stock is sprinty. Thinking to play in the ZCAT for the lead up into earnings. I continue to own the common.

  63. 63
    crysball Says:

    Below is a cut and paste of a letter to the Wall Street Journal from Terry Barr (CEO Samson O&G) pertaining to the causes (mis actions by BP) of the Manacando blowout:

    In response to Tony Hayward’s June 4 op-ed “What BP Is Doing about the Gulf Gusher”: It is time that the publicity spin that BP is putting on this disaster is put into perspective. What is alarming about the content of the article is not so much what it says, but what it does not say.

    Mr. Haywood, chief executive officer of British Petroleum, asks, “How could this happen?” The answer has largely to do with BP’s inability to follow its existing well-construction policies and those of the industry generally.

    The BP testimony to the House Committee on Energy and Commerce on May 25 says it all, but perhaps that material needs to be explained. From looking at that evidence, this is what we know:

    1) When cementing the production casing the cementing crew, which was being supervised by BP, had difficulty landing the top plug into the casing shoe. This was the first “red flag” because a satisfactory cement job to the production string is fundamental to the safe operation on a go forward basis. The fact that the cement job did not go as planned should have caused the testing operation that followed to be carefully scrutinized, it clearly was not.

    2) As is normal practice, the integrity of the pressure tight seal was tested by pressuring up on the casing and observing the pressure response. If pressure bleeds off there is clearly a problem with the pressure integrity of the shoe, However, industry practice dictates that a positive test, that is no pressure drop, is not diagnostic, simply because the reservoir pressure is sufficient to retain the pressure being applied. A negative test is useful because it is diagnostic of a failed cement job. In this case the test was positive.

    3) Again, as is normal industry practice a negative pressure test was run, with pressure released from inside the casing and the pressure response was measured. In this case evidence has been bought before the committee that there was a 1,400 psi pressure response. This response is highly diagnostic and is therefore the second “red flag” and at this point the BP supervisors should have concluded that they had what the industry calls a “wet shoe.” That is that the cement job had failed to form a seal at the casing around the reservoir which we know contains high pressure oil and gas.

    4) At this point a decision should have been made to do a remedial cement job; this is an expensive operation, but having seen a 1,400 psi response, there was no choice.

    5) The BP engineers then proceeded with the balance of the operation to temporarily abandon the well. This meant replacing the 14-pound-per-gallon mud that was in the wellbore with 8.5-pound-per-gallon sea water. The denser mud had been, up until this time, the primary pressure control and was keeping the hydrocarbons in place despite the lack of an adequate cement job at the casing shoe.

    Given the two red flags that had been thrown up previously, one would have expected that as a precaution a cement plug would have been placed somewhere in the wellbore as a secondary pressure seal before this primary pressure control system (heavy mud) was evacuated from the wellbore. But at the very least the mud replacement operation should have been heavily scrutinized. Clearly it was not.

    6) Evidence provided at the hearing, including the pressure data transmitted from the rig for the last two hours before the explosion, is diagnostic. At 8:20 p.m. on the day of the explosion the pressure data suggest there was a constant flow of sea water being pumped into the drill pipe that was displacing the heavier mud system which was the primary pressure control for the well. The rate going in was 900 gallons per minute, but the flow data of mud coming out was steadily increasing from 900 gallons a minute at 8:20 p.m. to a rate of 1,200 gallons per minute at 8:34 p.m. During this 14-minute period one can conclude that hydrocarbons were flowing and pushing more fluid from the wellbore than was being pumped in.

    This is what this data is supposed to monitor, but the well flow evidence would appear to have been ignored, because at this point the BP rig supervisors should have gone to a well kill operation and started to pump heavy mud back into the well bore to restore the primary control mechanism. Instead the mud continued to be evacuated.
    7) At 9:08 there was another piece of evidence that is very clear cut. The sea water pump was shut down presumably to check the well stability. However, with the pump shut down a pressure increase was seen in the standpipe (SPP). This pressure response has to be associated with the reservoir flowing hydrocarbons and again at this point kill operations should have been initiated by the BP engineers.

    8) From 9:08 p.m. to around 9:30, despite the sea-water pump either running at a constant volume or shut-in, the SPP continued to increase; again this is evidence that the well is producing hydrocarbons and should have caused a kill operation to be initiated.

    9) At 9:30 p.m. the seawater pump was again shut-in to presumably observe what the well was doing, and again there is a notable increase in the standpipe pressure.

    10) At 9:49 the SPP showed a very large increase and the explosion followed—this is obviously the point at which the gas and oil reached the drill floor and found an ignition source.

    Mr. Hayward and BP have taken the position that this tragedy is all about a fail-safe blow-out preventer (BOP) failing, but in reality the BOP is really the backup system, and yes we expect that it will work. However, all of the industry practice and construction systems are aimed at ensuring that one never has to use that device. Thus the industry has for decades relied on a dense mud system to keep the hydrocarbons in the reservoir and everything that is done to maintain wellbore integrity is tested, and where a wellbore integrity test fails, remedial action is taken.

    This well failed its casing integrity test and nothing was done. The data collected during a critical operation to monitor hydrocarbon inflow was ignored and nothing was done. This spill is about human failure and it is time BP put its hand up and admitted that.

    Terry Barr

    President
    Samson Oil and Gas
    Lakewood, Colo.

  64. 64
    zman Says:

    Can’t say enough good things about the Sennheiser wireless headphones as we head back into earnings season.

    BTU call about to start

  65. 65
    BirdsofpreyRcool Says:

    crysball — thank you for posting the letter.

  66. 66
    zman Says:

    Tried to grab a little WLL and missed on that last little roll lower, being patient, this is one I like to take fewer calls in and often at or just out of the money. This time around I may go as far as taking the $90s, but the $85s may be it.

    BTU 2Q Call Notes 1

    China comments: Fast GDP growth (8 to 10%) is expected to continue. 2010 at 10% est, says the Chinese government is acting to talk like its easing but not really amounting at much.

    Cites today’s IEA comment that China is now the biggest energy consumer.

    China will pass the US as the leading manufacturer on the planet this year.

    Power generation up 19% this year, coal imports will continue at a record pace.

    Met coal seeing moderation in the rate of growth. Overall consumption remains strong, second quarter reference price for met coal was 220 per ton. Good news for WLT.

  67. 67
    BirdsofpreyRcool Says:

    TechTrader checking in ex post facto. Saying his “best trade” was to go long the morning sell off. He took his chips off the table now. He’s saying that history predicts a sell off in the last hour of today. But he’s not trading that… he made his pile already.

    just fyi

  68. 68
    zman Says:

    BTU

    US Comments

    Generation up 6% this year
    Coal production domestic down 3% (shutting of mines)
    Big stock pile draws and increasing.

    This is what’s keeping prices up and yet when you look at the Wrap Posts, you can see the coal names have not kept up at all with the fundamentals.

    This draw down of US inventories is good for coal prices but also a positive for natural gas.

  69. 69
    zman Says:

    Thanks for the update BOP

  70. 70
    zman Says:

    This morning’s WFT trade is up 33%.

    HAL from yesterday up 77%.

    The buy (or not) the results methodology clearly less risky in this market environment.

  71. 71
    elduque Says:

    Why is HK going up?? Isn’t always supposed to go down.

  72. 72
    zman Says:

    Analyst Watch:

    TAT – Global Hunter initiated with a Buy today. If you have it please send to zmanadmin@gmail.com

  73. 73
    choices Says:

    #63-thanks, crysball, also for your cmts on ATLS last eve.

  74. 74
    andy Says:

    bop – PAYD is this a good time to average down on this dip?

  75. 75
    RMD Says:

    GHS initiates on CRZO (target 45, 7X ’11 Eda), END (2.90, 10X), HNR (14, 3.3X), and TAT (valuation metrics murky).

  76. 76
    andy Says:

    eld – HK its cause i was thinking of sellinf it. wanted to keep me in so it could inflict more torture!!!

  77. 77
    BirdsofpreyRcool Says:

    PAYD is a call option. Call options can go to zero… or they can go up multiples. If the company can pull off what they say they can do, stock goes up a lot.

    Actually, it’s better than a call option b/c company doesn’t have any debt (so tough to go all the way to zero and the “call option” has a loooong “expiration date”). If they don’t pull off their patent monetization, stock sinks to 10c and stays. It’s one of those very asymmetric pay-off situations that makes owning a little “worth it.” But owning a lot, not wise.

  78. 78
    tomdavis12 Says:

    Z: Notes from NE CC: Quarter was a clear miss. Miss was 1. Higher tax rate 19% vs 13% ( they expect the year to be @ 15% ). 2. Continuing litigation in Nigeria. 3. Lower day rates. 4. Lower utilization and more down time 5. GOM mess. CSFB comment early today thought the negatives were in the stock at 7x ’11 earnings and 4.5x CFPS. Reasons for stock higher today is simply that this is the first opportunity for sell siders to have their hands held. Z I will forward answers to questions you may have directly. I know the site is not that interested unless you are involved. Areas of positives were 1. Pemex, PBR, Shell, West Africa, equipment changes, Outside GOM business as usual. NET/NET I would still expect some lower sell side numbers. Biggest catalyst for the upside is the lifting of the moratorium (no sh*t). Drop dead bottom in stock is $26 – $27 which is BV.

  79. 79
    choices Says:

    Z-thanks for the orange charts-question on interest coverage-at what point should one be very concerned about interest coverate-noted KWK, with its extremely high debt ratio, has only approx 3.5x coverage, HK with smaller debt ratio, has about 4x.

    Thanks.

  80. 80
    zman Says:

    HK. NG up nearly 2%, green group. It has not performed well to be sure. Does that mean it is a bad company? Absolutely not. De-leveraging, getting slightly oilier, well hedged, low operating costs, opportunity for more monetizations (EFS midstream next year and maybe a sale of their Fayetteville position), strong position in the EFS and Haynesville, evolution in management underway (moving away from being buy all the acreage you can see types) and one of the highest growth rates in the mid cap segment this year and into the foreseeable future. The promise not to drop an equity deal on us this year and next is obviously not believed by the Street. Biggest problem is that it’s so gassy and not playing in the Marcellus which garners a bigger P/CF multiple due to the local market pricing premium relative to other U.S. markets. I have no options there at the moment, just the common.

  81. 81
    zman Says:

    Choices – I balance that against the growth of cash flow or EBITDA plans and their capex requirements. Below 2x and I get cautious.

    Thanks Tom. Why do you think it bounced going into the call?

  82. 82
    BirdsofpreyRcool Says:

    EXXI’s COO exit… hearing “no apparent reason” for Weyel’s departure. At least, nothing related to operations. With that Wild Crowd there at EXXI, tough to think it was anything extracurricular, but ya never know.

  83. 83
    zman Says:

    BP on the tape saying it will sell Pakistan but also Vietnam assets, total deal valued at $1.7 B.

  84. 84
    zman Says:

    Can’t open the GHS TAT report that was sent but thanks for trying. In the summary, I see one of their larger exploratory shots (100 mm boe target) has been spud.

  85. 85
    zman Says:

    BTU call ongoing, all positive stuff.

  86. 86
    zman Says:

    …. very strong for WLT especially.

  87. 87
    zman Says:

    Reason for the 8 cent rise in gas should be all the heat. But instead it is this:

    http://media.myfoxtampabay.com/myfoxhurricane/

    Note the tracks. That looks like something that we’ll be call Bonnie soon unless it gets snagged on Cuba.

  88. 88
    tomdavis12 Says:

    Z: 81 It seems like a sector bounce. The stock was already up .50 – .60 before any positives from CC. What might enter some reports is the business as usual outside of GOM. They did say @ $80 crude EVERYONE in their space will be happy. They are seeing slight thaw from our hardass govt types. Value guy Einhorn @ Greenlight Capital bought 5.2% of ESV. Value people will be looking at this sector.

  89. 89
    zman Says:

    BTU only up modestly, not as much as I would have thought given the tone of the call but they are some of the most positive (not overly optimistic) guys in the energy so you can grain of salt the smiles in their voices. Still, hitting on all cylinders and the stock is off 20% from their spring highs. Worse losses from the highs for WLT though and that’s a more focused story on metallurgical coal. ANR should be interesting in here too, just coming off the bottom. If you get that the BTU call is a wakeup call for the coal sector, a number of names should be bottoming. Will have a multiple table update in tomorrow’s post.

  90. 90
    choices Says:

    CAM up >3% today, bought some today, yesterday.

  91. 91
    zman Says:

    Choices – yeah, good work, been running since the well got capped, I think it was you that pointed out that was their new stack on top of their old BOP. The 2010 Blowout Preventer Act, if passed, would be an enormous boon for them.

  92. 92
    zman Says:

    Analyst Watch:

    HAL – Canaccord raising 2010/11 EPS to 1.97, $2.65.

    Again, Street at $1.47 and $2.10.

  93. 93
    Jerome Blank Says:

    From a technical perspective, CAM is right up against its P&F bearish trendline here, it breaks P&F resistances and goes on a new P&F buy signal on a print of $39, this correlates with 200 day daily SMA resistance, thinking a pullback of the 200 on a P&F buy print, ie: a higher low might be the place to try….I’ll post a chart later…

  94. 94
    zman Says:

    BP pressure now at 6,825 psi, continuing to rise. If no real leaks emerge, I’d bet they leave it on the pressure test (capped) until the relief well intersects.

  95. 95
    zman Says:

    BTU call ended, stock up 30 cents, backed off highs with market. Opting not to play today but BTU, ANR, and WLT my first 3 choices for coal when I go back into the trade.

  96. 96
    zman Says:

    BG39 – Did the Emailbag address your ?s

  97. 97
    bill Says:

    bone springs

    Concho Resources Inc. on Tuesday expanded its natural gas and oil holdings in the Permian Basin of New Mexico after agreeing to buy privately held Marbob Energy Corp. for $1.65 billion.

    The acquisition would give the Midland, TX-based producer about 100,000 acres in the emerging Bone Spring tight limestone and sandstone play, and it is the largest purchase in the company’s history. The cash-and-stock purchase would add proved reserves estimated at 76 million boe, 42% weighted to natural gas and 63% proved developed. Marbob produced 14,000 boe/d in the first three months of this year.

    Concho, which plans to retain Marbob’s technical and operational staff, would gain around 166 million boe of estimated unproved reserves and close to 2,300 identified drilling locations.

    “This acquisition has been one of our highest priorities for the last three years,” said CEO Timothy A. Leach. “These assets are a perfect complement to our New Mexico Shelf position, and they double our Yeso drilling inventory. In addition, Marbob’s Bone Spring acreage, when coupled with our existing acreage, gives the company over 100,000 net acres in one of the most exciting emerging plays in the industry today and adds a significant new area of growth to the company’s portfolio.

    “After closing, we plan to increase the activity level and rig count on these acquired properties, which should result in significant production growth over the next several years. Going forward Concho will be a bigger version of today’s company, with a large, high rate of return, high margin drilling inventory that will be complemented by the Bone Spring play.”

    About 1,300 of the drilling locations are in the Yeso play, with 1,000 in the Bone Spring play, which is in Lea County, NM. Marbob currently is running five rigs, including one rig drilling Yeso wells and four rigs drilling in the Bone Spring play. The reserve-to-production ratio is estimated at 15 years.

    The Marbob acquisition comes less than a year after Concho agreed to spend $225 million to buy wells and acreage in the same area of the Permian Basin. At the end of 2009 nearly all of Concho’s total estimated net proved reserves were in the Permian Basin, weighted 67% to crude oil and 33% to natural gas.

    Concho intends to finance the transaction with a combination of equity and debt. Marbob at closing would receive $1.45 billion in cash, 1.1 million shares of Concho common stock valued at $50 million in the aggregate and a $150 million 8% senior unsecured note due in 2018. The transaction is set to close by the end of November.

    The Permian Basin’s Bone Spring contains tight limestones and sandstones that overly the Avalon Shale in Lea and Eddy counties in New Mexico. Operators have begun to take leases in the region in their shift from gas-heavy portfolios to higher liquids plays.

    During conference calls to discuss 1Q2010 earnings, several independents alluded to their plans to drill wells in the region, including Chesapeake Energy Corp., which had drilled eight Avalon Shale wells and 11 Bone Spring wells on 120,000 net acres.

    Devon Energy Corp. also is said to be one of the biggest leaseholders in the play. Anadarko Petroleum Corp., which controlled close to 170,000 net acres earlier this year, was running four rigs in the Bone Spring play. One completion well flowed at a maximum rate close to 1,200 boe/d, Anadarko said.

    Last month Cimarex Energy Co., which is based in Denver, signed an operating agreement with FieldPoint to drill two wells targeting the Bone Spring formation. FieldPoint would own a 43.75% working interest (WI) in the wells; Cimarex is to own a 37.5% WI while partners would own the remaining stakes.

  98. 98
    blackgold39 Says:

    Z – that covered it.

  99. 99
    Jerome Blank Says:

    RE: #62, WLL, interesting chart, the P&F buy print at $83 corresponds with strong resistance at the 50/100 day SMA at say the avg about $82.50, so if WLL can break out above resistance and print the buy, this would be a strong technical bullish indication…

  100. 100
    zman Says:

    JB – that one, as you know can run $2/day for days on end, sort of a thinner trader, exceedingly cheap, all onshore U.S., and oily. Only know against them is their overall lifting costs are high to the group but that’s due to the enhanced oil recovery part of the portfolio.

  101. 101
    zman Says:

    BTU rolling to red as the market re-weakens, watching to see how much that pulls down the other coal names.

    BP shares still can’t catch a break, Cameron meeting with Obama sometime today, no headlines out of that yet but Cameron was defending the company this morning.

    Meanwhile you have stories like:

    “Is experimental well cap making disaster worse?”

    And the answer in the first paragraph of the story is no. That’s just yellow journalism.

  102. 102
    ratberto Says:

    101 – “Are Headlines that End with Question Marks ever other than BS Stories?”

  103. 103
    zman Says:

    re 102. Good point.

    Grabbing lunch.

  104. 104
    blackgold39 Says:

    Anyone know where to find up to minute BP drilling reports from Macondo Relief #1?

  105. 105
    jiveyjr Says:

    FWIW, I took Z’s advice and sold my SSN allocation at 1.22…nice profit

  106. 106
    choices Says:

    #93-thanks, JB-voted.

  107. 107
    zman Says:

    Jivey – glad it worked, have no idea what the word “advice” means though.

  108. 108
    Jerome Blank Says:

    RE: #106, choices, thank you…

  109. 109
    jiveyjr Says:

    re: 107…foggot, this is all FEPO on here…”for educational purposes only”….

  110. 110
    ram Says:

    ZMAN – Thanks for the SSN reminder. The shares added to my account today. Since I didn’t pay for the allocation, I sold some of my previous shares to take care of the negative balance – don’t have to wait for a refund.

  111. 111
    AAA Says:

    I have another well engineering question relating to Macondo. Was the failure of the top kill procedure due to leaks out of the BOP or an inability to create enough pressure to get mud down the wellbore or what? At the time it was speculated that the casing was damaged, but the ability of the new cap to hold pressure seems to indicate that the casing is more or less intact. And if the casing is intact, why not just start producing from it and drain the reservoir instead of attempting a tricky relief well intersect?

  112. 112
    choices Says:

    #91-z, CAM-would like to take credit but it was not me-it does look like it has healthy potential, however, as you have noted.

  113. 113
    blackgold39 Says:

    Top kill likely failed because they couldn’t build the hydrostatic they needed going in through the BOP. Mud was flooding out with the HC. Shot in the dark that would have saved them some time and expense, and was low risk because if it failed, nothing would have changed (well still blowing HC everywhere) and relief wells still drilling.

    Relief well is a much more reliable way to kill the well, because mud will flood upward, then downward through the column and create enough overburden to achieve the end goal of killing the well. Honestly, the relief well’s progress is pretty good, and they should be just days away from intersecting if they get it on the first pass.

    Main reason to kill it instead of producing it is because the wellbore is unstable and nobody knows for sure whether the well is producing up the casing shoe or the annulus (probably annulus), but in any event, the wellbore is uncontrolled, which means any future intervention ops would be extremely high risk. Not only that, shutting in the well would always put the other casing strings at risk of bursting or failing. generally not solid operating practices, and asking for trouble.

  114. 114
    bill Says:

    oas is moving

  115. 115
    blackgold39 Says:

    re 114: low volume, I wonder what is up

  116. 116
    blackgold39 Says:

    DJI making a run, hauling BP along for ride

  117. 117
    elduque Says:

    Z- I have said this before, but it bears repeating. You provide an invaluable service to us all. Whether it is an SSN, Charts of Midcaps, Nat gas, Oil, or answering all our questions.

    Mahalo

  118. 118
    blackgold39 Says:

    NFX blowing past trading levels

  119. 119
    BirdsofpreyRcool Says:

    HeadTrader saying the US issued a new order narrowing the deep-water drilling moratorium. He cites this for energy taking off.

    Is this something new?

  120. 120
    blackgold39 Says:

    Dow now really firing off

  121. 121
    BirdsofpreyRcool Says:

    I think HeadTrader just pulled some headlines… they look “new,” but are just repeating what has been done already.

    So, why the spike in energy? Just a high-beta move with the mrkt??

  122. 122
    blackgold39 Says:

    APC late, but now also on the move

  123. 123
    tomdavis12 Says:

    BOP: Comment on NE CC said that the second moratorium had an end date or sooner. That was not in the first. Maybe your article from yesterday is showing more movement. It was also stated that enormous pressure to change is building.

  124. 124
    choices Says:

    Gold-VTZ, FWIW-I have been watching RGLD as indicator on bullion-it is up slightly today but it has been very weak of late-has been a fairly good reflection of short-term prospects on bullion-I have been waiting for RGLD to firm up before getting too comfortable w/bullion.

  125. 125
    zman Says:

    Re 117. Thanks very much.

    Wow, from the headlines coming out of DC, I have say, Cameron is wimp. Show some sack man, sheesh.

  126. 126
    zman Says:

    “BP must cap well, pay compensation” – Cameron

    Have they ever said anything otherwise? No.

    “Understands American’s anger over BP oil spill” – Cameron

    That’s like a politician saying they “understand times are tough”. Useless.

    “UK will engage constructively with Senate hearings into BP role in release of Lockerbie bomber” – Cameron

    British govt already said BP wasn’t involved. So what’s to engage in?

    If he had brass balls he must have been forced to check them at the door to the Oval Office.

  127. 127
    blackgold39 Says:

    Weak.

  128. 128
    zman Says:

    Obama confident the British govt. will cooperate in the BP / Locherbie bomber hearings.

    What in the world does that have to do with getting the well capped and paying for cleanup and compensation?

    “Important to both U.S. and British economies that BP stay strong, stable” – Cameron.

    Oh, after all the other headlines. That’s rich.

  129. 129
    BirdsofpreyRcool Says:

    Politicians — it’s a global disease.

  130. 130
    1520sbroad Says:

    #87 — that my fox tampabay hurricane site is pretty slick. I hadn’t looked at it yet. Nice to see all those shots on one screen.

  131. 131
    bill Says:

    i just dont get sd nothing seems to help the name

  132. 132
    elduque Says:

    z- How would you rate SWN, at this price compared to HK.

  133. 133
    zman Says:

    Unless the Locherbie guy took holiday in the Gulf and blew up the Deepwater Horizon, I really don’t see why the witch hunt is heading in this direction now. Oh, wait, right, right… it’s a witch hunt.

  134. 134
    bill Says:

    bot some aug 6 on sd for 55 cents.. all in

  135. 135
    zman Says:

    HK is cheaper now and that has not always been the case or is it justified in my book. Very different companies. Yes both gassy but HK’s management has a history of outspending Capex to grow its base. Now that is slowly reversing, call it 2012 for when HK is CF breakeven. HK by 2011 will be more flexible than it has been since early 2008, with different plays allowing it to allocate capital to chase the best IRR. SWN is less flexible in that regard (really only one play now but they are working on a couple more) and so their flexibility is chiefly one of ratcheting up or down their rig count in the Fayetteville. And they blew it on hedges this year, betting a cold winter would spike the strip long enough for them to get a nice hedge on … didn’t really happen. I prefer my names hedge not everything but at least consistently, building in hedges when opportunity strikes but also constantly layering to make sure that the budget is protected. NFX is very good at that. HK has been in the past and is well hedged now. Just seems prudent. On the other hand, SWN has been much more conservative with their balance sheet and has never been called a “serial filer” of equity unlike Floyd. SWN is not expensive for SWN either at the moment. But HK is exceptionally cheap for HK. More interested in FST and NFX than either of those two as far as the near term goes although they are both due a bounce as well.

  136. 136
    AAA Says:

    Blackgold39, Thanks for info in #139.

  137. 137
    zman Says:

    Didn’t make the headlines somehow but was in an updated story.

    Cameron insists that BP had no role in the release of the Lockerbie bomber.

  138. 138
    tomdavis12 Says:

    Z: LINE New High. Great call Z.

  139. 139
    VTZ Says:

    RE 124 – With RGLD the problem was the offering that undercut existing shareholders and was dilutive. Hard to use that as a proxy for recent gold activity since the offering.

  140. 140
    Nicky Says:

    Afternoon. Just a quick fly by as all seems to be going as to yesterdays stated plan.

    I was looking for a pullback to 1055 – 57. Then basically up. So far so good. We look to be working on one more little wave up to make a higher high today and then I am expecting a 23/38% retracement of the move up before moving higher. It could be deeper but don’t be surprised if it is shallow.

  141. 141
    skimo Says:

    Sold off half the SSN allocation for nice profit, thanks for keeping us informed of the opportunities.

  142. 142
    zman Says:

    Thanks Tom – I think my other yielder, WHX, will play catch up soon.

  143. 143
    zman Says:

    Thanks for flying by Nicky, again, spot on!

    Thanks skimo.

  144. 144
    zman Says:

    Have a quick meeting, back in 30 minutes.

  145. 145
    zman Says:

    JB – would you take a look at NFX when you get a chance, thinking of ZCAT trade pre earnings on Friday.

  146. 146
    tomdavis12 Says:

    Z: 142 WHX should go ex-div approx 8/18. When you have a 13.5% yield, it will be hard not to show a little more strength. (:

  147. 147
    elduque Says:

    How much does the moratorium in the gulf effect NFX.

  148. 148
    1520sbroad Says:

    #135 – i agree with all points on the SWN/HK comparison. One other asset that SWN has that i don’t think has any assigned value is their gathering asset in the Fayetteville. HK has already JV’d their gathering with kinder morgan.

    I have always been impressed with SWN’s mgmt style. HK – not so much.

    I could also see either as a target someday.

  149. 149
    jat Says:

    re 145, what do you think happens on the quarter?

  150. 150
    blackgold39 Says:

    Re 147: NFX ops unaffected by gulf moratorium.

    Planned TD of Pyrenees made it to TD before first moratorium went into effect, not scheduled to spud another until January, missing the entire window.

  151. 151
    blackgold39 Says:

    Interesting trivia: NFX owned the Macondo block before selling off to BP.

  152. 152
    zman Says:

    Eld – I’m going to say not all that much and the delays of their 4 projects should be factored into Street estimates at this point but that is what I have been thinking and let me dig up the actual net bopd impact on that to give you an idea of what I mean. It’s also possible that even with the 6 month delay they are not simply pushed back 6 months. But from a bottom line standpoint, I won’t quantify and will just stick with “not much for 2010”.

    Jat – should be better than inline by a little, both historically speaking and given the way commodity prices shook out relative to differentials in several of their regions. I think news will be more important than the numbers for them. Will have more on that with the Thursday post.

    Wow, missed my WLL this morning.

  153. 153
    zman Says:

    re 151. They had Blackbeard too and that’s MMR/EXXI/others now. I don’t know if they have a piece of Treasure Island still (TISDZ).

  154. 154
    West Says:

    Looking for CXO to sell North Dakota acreage soon, possible purchasers are NFX, OAS, SM, WLL and local Midland co BTA. They have a joint venture with NFX now on the Nesson anticline acreage.

  155. 155
    zman Says:

    West – they’re small in the Bakken right, like around 12,000 acres?

  156. 156
    jat Says:

    re 154, mgmt is holding a conference call today at 4pm

  157. 157
    jat Says:

    exactly like 11k

  158. 158
    zman Says:

    Analyst Watch:

    HAL – Credit Suisse target from $42 to $45, remains top pick.

  159. 159
    jat Says:

    net

  160. 160
    blackgold39 Says:

    re 152: Z- from my understanding, NFX did not plan to spud any deepwater projects during the entire moratorium period by virtue of sheer luck, and so I am not aware that this will affect their production at all.

  161. 161
    zman Says:

    We have no eco data releases (at least of consequence tomorrow) and a break in energy earnings. It will be up to the broad market/crude/ng (if there is a storm) to maintain momentum through Thursday.

  162. 162
    zman Says:

    BG – thanks, then I don’t have to pull up their site and review my notes for another day ;-). I normally due pre-release on my favorite names. I hold a perpetual position in the common here (some day people will wake up to the value or some day they will get bought). Not in the calls at the moment.

  163. 163
    zman Says:

    Jat – what countie(s)?

  164. 164
    elduque Says:

    Thanks one and all.

  165. 165
    blackgold39 Says:

    Amen

  166. 166
    West Says:

    IHS reporting that EOG got another terrific well in Eagleford Marshall Unit Gonzales Co., TX, ” 1,718 bbl. of 44-degree crude and 1.16 million cu. ft. of gas per day through fracture-stimulated Eagle Ford perforations at 11,676-13,759 ft. The Eagleville Field well was horizontally drilled to 14,367 ft., 11,516 ft. true vertical, and plugged back to 13,807 ft. “

  167. 167
    jat Says:

    Well the JV acreage is in mckenzie and it looks like the other acreage is in mountrail? It is a far ways away from Manhattan so you’ll forgive me if it’s approximate.

  168. 168
    West Says:

    http://ir.conchoresources.com/phoenix.zhtml?p=irol-eventDetails&c=211775&eventID=3225767 …Link to CXO call at 3:00 cdt

  169. 169
    jat Says:

    I’d imagine that all asset sale proceeds go to revolver paydown / marbob capex, can’t imagine it being a gigantic chunk of cash though. any wiser thoughts appreciated.

  170. 170
    blackgold39 Says:

    West – wonder if they drilled out, or why they plugged back. 1718 bbl from ~2000′ of lateral is impressive, even if it is pricey to drill….

  171. 171
    zman Says:

    Re 166. Thank you very much. That’s another name I’ll be in pre and post report calls.

    re 167, aw, you did just fine, thanks, was feeling lazy.

    Jat could be $2,000 to as much as $5,000 / acre depends on how it’s laid out, where exactly it.

  172. 172
    blackgold39 Says:

    Z- When is the EOG call?

  173. 173
    zman Says:

    re 172. August 5.

  174. 174
    zman Says:

    EOg call to have all kinds of fun on it. Bigger than average EFS wells, Montana Bakken wells, more north Barnett combo wells, China tight gas sand project will be either go or no go (I’m betting it’s a go … Burlington loved that play before it was carved up by COP and landed in EOG’s hands).

  175. 175
    zman Says:

    Oh and I left out Niobrara comments. Those could be good or bad, thinking good but they have been coy, even for them.

    Beerthirty.

  176. 176
    West Says:

    BG , I was wondering and it didn’t say. They have 3 offset wells that IPed at 1658 bopd, 1492 and 703 and all less than 500mcfgpd . In the for what it is worth department I am taking the the other horses in the EOG/SSN race and saying that someone other than EOG is buying SSN acreage.

  177. 177
    blackgold39 Says:

    I will probably play in that one also

  178. 178
    zman Says:

    CRB releasing ahead of calendar. Damn. Hate that. Argh. Dividend increase.

    BP on the tape with another 24 hour pressure test extension.

    BP has 5 leaks around the wellhead – none consequential.

    BP could have plan done for new static kill within 24 hours.

  179. 179
    zman Says:

    West – after having looked over the prices paid for other stuff, I’m revising my thought there too. Not Papa. Aubrey.

  180. 180
    choices Says:

    #139-I guess it depends on what they did w/the cash-since offering, acquired additional royalty interests, also deal w/Thompson Creek was announced 15 Jul-Mt Milligan project, however, still under construction.

  181. 181
    zman Says:

    West – check your email.

  182. 182
    zman Says:

    BP / APA on the tape post close…

  183. 183
    zman Says:

    APA buying substantially all of BP’s midstream biz in Alberata, 10 fields permian, some stuff in Egypt.

  184. 184
    zman Says:

    BP / APA, $7 B. Should wake up BP shares a bit. Prudhoe bay not in the deal. BP gets $5 B on July $30th.

  185. 185
    West Says:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzg2MTg4fENoaWxkSUQ9Mzg4MjMzfFR5cGU9MQ==&t=1 …..CXO recent presentation 6-10-10

  186. 186
    blackgold39 Says:

    My APA friends aren’t too pleased

  187. 187
    zman Says:

    Anyone seen API yet? Decent bump in after market crude.

    AAPL well above Street estimates.

  188. 188
    crysball Says:

    Z,
    Will you be considering BP calls or does Topkill have too much downside risk?

  189. 189
    zman Says:

    Crys – I’ve got some now, not planning to add until we are closer although I may take some quick trades here and there.

  190. 190
    zman Says:

    APA 21 mm share secondary to pay for it + cash off the balance sheet.

  191. 191
    zman Says:

    BP’s 2 on site well leaders took the 5th today.

  192. 192
    jat Says:

    Anyone have Global Hunter’s initiation on CRZO and others?

  193. 193
    crysball Says:

    Relationship of changes in World GDP to oil prices…. An interesting analysis below the graph:

    http://www.rigzone.com/news/article.asp?a_id=96128&hmp=1

  194. 194
    Jerome Blank Says:

    Re: #145, NFX, nice bullish engulfing candle at the 200 day SMA, the issue here is the close right in the middle of a huge consolidation triangle, a trade right here is not the easiest to manage… I’ve updated the daily chart for perspective, NFX reverses back into X’s on the current sell signal with a print of $52 and goes back on a buy signal at $53, but the buy signal occures right at P&F trendline resistance, overall NFX looks technically promising, but hard to manage right now…

  195. 195
    zman Says:

    Thanks JB

  196. 196
    BirdsofpreyRcool Says:

    BedTime Market Strategist
    —————————————
     
    Same Story, Different Result.
    The trading day commenced with a weak opening as the initial investor reaction to a number of high profile earnings reports was disappointment.  The mixture of misses was both top line and bottom line, but again, for the most part they were slight.  There were also several companies that met expectations.  The 1.4% gap down at the open was enough to shake out those lacking conviction.  The rebound started almost immediately, but was reserved and took until just before 2 pm for the S&P 500 to get into positive territory.  For that matter, streetwide chatter that the FOMC would reduce the Interest on Excess Reserves (IOER) also helped the push into the green.  The story was refuted by CNBC, but Equities managed to sustain their gains.  It was the first anecdotal sign of positive trading action in some time and carried through until the close.
     
    IOER-Why it matters.
    The potential benefit of lowering the IOER rate is that of not only another interest rate easing, but more importantly, it would be intended to serve as a catalyst to prompt additional bank lending.  Banks still have over $1 Trillion in Excess Reserves (Chart 1) from the Fed’s Quantitative Easing program parked in the safety of the Fed’s coffers.  Year over year M2 (Chart 2) growth has been running under 2%, which is muted for a nation that has recently completed 15 months of Quantitative Easing.  Reducing the interest on reserves to zero theoretically would incentivize banks to lend or invest those reserves.  Thus getting that money into the economy would stimulate activity and would appear as new M2 growth.  It is the typical policy of trying to provide a nudge towards risk taking in a risk averse world.  Currently, interest on excess reserves is 25 basis points, so the banks get the benefit of the yield of a 1 Year T-Bill for overnight parking.  In an uncertain world, that’s not a bad deal if you happen to have an extra Trillion dollars sitting around.  That being said, banks are only making $2.5 Billion per year from that interest.  They could make the same amount by lending out $65 Billion (6% of those reserves) at 4%.  Evidently they are opting for the conservative route.  We would note that the weak response by the market to the revenue numbers at the banks will likely send the message to bank executives that they will need to pick up the pace of lending before the year ends, so a nudge from the Fed may not even be necessary.  Regardless, having a lever to pull if necessary is a good thing.

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