Tuesday Morning And Futures Are Pointing Higher Again

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Market Sentiment Watch: Yesterday was the 8th time in history the Dow has scored triple digit gains three days in a row. Equities have been lifted by generally positive earnings (FDX yesterday, DD today) and a dearth of real economic news. Things looks a bit extended in the equity markets but many technicians are actually getting more bullish now, dropping calls for the S&P to revisit 950 anytime soon and instead targeting 1,150. I've never been much of a subscriber to the idea that something being up, without good reason, is in and of itself a reason for it to go up more. In other words I'm getting more cautious as later in the week we will get a number of potentially market moving economic numbers and the trend in many of these of late has not been friendly.  

BP Spill Watch

  • To Russia With No Love: Tony Hayward sent packing ... to Russia. Hayward to remain on as CEO until October 1 with the more likable (less cold, less British)  Bob Dudley to be first American CEO of BP. Note to Obama, people didn't like the too level headed approach Hayward took. Hmmm.
  • BP reported 2Q results. Some highlights:
    • $32.2 B spill charge taken
    • 2Q operating cash flow was actually up 31% YoY excluding the charge at $8.9 B on the quarter. This gives you a good idea of the current cash flow with $3 to $4 B per quarter being maintenance capital and the rest being available for things like cleanup and compensation in the Gulf. 
    • Asset sales target raising $30 B over the next 18 months.
    • Debt now $23.2 B, sees that falling to $10 to $15 B within 18 months. 
  • Static kill to begin as early as next Monday
  • Relief well as early as next week too.

Stupid Is As Stupid Does Watch: Greenpeace disabled 46 BP gas stations in London to "express their anger" over how BP has handled the oil spill.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today – RRC earnings,  WHX thoughts update, QEP Operations Update, SSN Delays the Deal
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $8,000
    • 68% Cash
    • Yesterday’s Trades:
      • HAL – Sold the (10) HAL August $30 Calls for $1.66, up 86%. Catalyst there has come and gone with earnings and I was just milking it at this point.
      • WLL - Added (2) WLL August $80 Calls for $7.10 with the stock at $85.70 and earnings due on Thursday. Expecting positive commentary from their traditional Bakken play and also from their nascent Three Forks Sanish play (Lewis and Clark) down in the southwest corner of North Dakota. Potential for a beat here seems slightly more positive than not. I continue to own the common in the ZLT.
  • ZIM (Zman Inefficient Markets portfolio)
    • $2,300
    • 7% Cash
    • Yesterday’s Trades:
      • None

Commodity Watch:

Crude oil closed unchanged at $78.98 yesterday in somewhat strange looking trading with commodity traders ignoring another decline in the dollar and a strong equity market. This morning crude is trading up slightly.

  • Early Read on Oil Inventories:
    • Crude: DOWN 1.875 mm barrels
    • Gasoline: UP 0.275 mm barrels
    • Distillates: UP 2.0 mm barrels

Natural gas inched up 3 pennies to close at $4.61 yesterday. The Street is looking for a fairly aggressive (small) injection this Thursday due to the recent near record heat.  This morning gas is trading up a few pennies.

  • Tropics Watch: All quiet on the horizon.

Stuff We Care About Today

QEP Operations Update

  • Guidance Boosted: 2010 production guidance goes from a range of 212 to 217 Bcfe to a range of 218 to 222 Bcfe, up 16% YoY on the mid. Attributable to:
    • a string of decent Haynesville and Pinedale Anticline wells
    • a nice Cana Woodford, liquids rich, well
    • Granite Wash (where they have 26,500 net acres) continues to impress with 2 wells with IPs of 13.7 and 23 MMcfgpd with a 3rd well testing now.
    • Bakken: added 3 more wells since last update: 1,779, 1,948, and 1,385 BOEpd IPs.
  • Earnings due out tonight with the 2Q call set for Wednesday.

SSN  - Deal Delayed Due To Title Access; Taking Them At Their Word For Now...

  • Delay delayed due to an extraordinary increase in leasing activity resulting in a rationing of the time for which any individual is granted access to the County’s land title records. That’s not unreasonable in my book, as I’ve seen it happen before.
  • The buyer has said that to date it is unaware of an title defects but that its research is still at an early stage.
  • Next Waypoints In The Story:
    • August 5th: $10 mm deposit paid to SSN by the still un-named counter party
    • September 5th: Balance of payment due (between $51 mm and $69 mm) depending on how the deal prices.
  • Nutshell. Not what I wanted to hear and not the end of the world either. The lack of earlier notice is a bit weak on the part of SSN as they didn’t just find this out but that does not materially affect the deal.

WHX Thoughts - Extending the Model

  1. Expecting them to release their next distribution press release first week of August, as last as August 10th.
  2. Forward yield (next twelve months) using my math and yesterday's close is 13%
  3. I'm at $0.61/share for the quarter but as always, I'm erring on the cautious side regarding a number of variables:
    1. Production down 5% from the prior quarter ... probably a bit steeper than it is going to be.
    2. A 50 cent differential to NYMEX gas
    3. and $21 / BOE operating costs.
  4. Street has walked the estimate the estimate up over the last 90 days from $0.62 to a current $0.70.
  5. Recall that last quarter, I was at $0.61 / share , WHX did $0.70 and two firms (RBC and Raymond James) were up at ridiculously high figures and then were "disappointed" when their models didn't work out. They both downgraded the name back in May, sending it from $23 to $15 almost overnight.

RRC Reports A Brick

The 2Q10 Numbers

  • Production of 472 MMcfepd was pre-announced
  • Revenue of $224 mm and $225 mm expected
  • EPS of $0.09 vs $0.11 expected
  • CFPS of $0.86 vs $1.00 expected


  • Guidance: Going Up....

    • 2010: goes from 12 to 14% growth, with a higher Marcellus exit rate driving the increase in growth.
    • 2011: looking for 25% growth
  • ... And So Is Spending. Capex for 2010 grew from $950 mm to $1.2 B.
  • Production from the Marcellus is now 160 MMcfepd, slightly above their mid year target.
  • RRC's midcon division is ramping up activity in the Wash plays, little to report as of yet but stay tuned.


  • 2010 gas hedges are now 75% of expected production
  • 2011 hedges were increased from 51 to 60% of production.

Nutshell: Not a lot new, another record quarter as far as volumes go as previously released. Per unit operating costs continue to fall as production ramps. I don't like the budget creep here and the comment was made that the board recently passed the budget increase but this is the first mention of it I can find in a press release so it's news to me.  Higher budgets at this time when the company is not pressed for acreage capture seems imprudent. Oh yes, and they missed on the bottom line.The stock currently trades at 10.1x 2010 and 7.3x 2011 CFPS and while this isn't historically expensive for the name it's not exactly cheap either and I don't see a pressing need to get long at this juncture.

Conference Call: Today, 9 am EST


Other Stuff

Asleep At The Wheel Watch: Barclays marked its estimates for E&Ps to market for oil and gas prices for the second quarter yesterday, July 26th. Nothing like taking a month to update historical numbers. Sheesh. Anyway, the outcome:

  • VQ target climbs from $14 to $25
  • XCO goes from $64 to $74
  • and PXP goes from $35 to $40.

VLO reports later this morning, conference call: today, 11 am EST.

Reporting Later This Week:

  • Wednesday: BRY and NBR
  • For the entire week's calendar click here.

Odds & Ends

Analyst Watch:

  • FTI - target boosted from $68 to $80 at FBR.

164 Responses to “Tuesday Morning And Futures Are Pointing Higher Again”

  1. 1
    kaman Says:

    Z- You're still holding LINE Aug 30's, correct?

  2. 2
    bill Says:

    robry is + 29 now
    He is still showing production growth of 10 % or more

  3. 3
    bill Says:

    this is 3 days old but points to a good week


  4. 4
    zman Says:

    K  – Re LINE, holding 10 August $30s and 50 August $31 calls in the ZIM.

    Analyst Watch:

    OAS – Initiated at Morgan Stanley with an equal weight. They basically say its good but is up 20% since the IPO while its peers are off 5% and they'd be looking for a better entry point. Notably, they put production growth at 130% and 120% growth in 2010 and 2011 respectively. This is slightly ahead of my initial model. My sense is that the other Bakken names had had a good run when this thing came public and in were due a pullback at that point. The move down in the broader market exacerbated their move lower while the new kid on the block has only recently advanced because of people like me anticipating positive coverage.

  5. 5
    zman Says:

    Thanks Bill, glad to see him coming up a bit.

  6. 6
    zman Says:

    VLO on the tape with a 2Q beat that should not be much of a surprise to anyone who’s looked at the cracks recently. Comments on cost cutting may help with the stock today more than expected but am still content to sit on the sidelines and watch for now as this group has been fairly head fakey. Plan to listen to the call later today. FTO, SUN, TSO, HOC, all likely to get a modest rise on this.

  7. 7
    zman Says:

    Analyst Watch:

    OAS – UBS starts with a Buy and $20 target.

  8. 8
    bill Says:

    extortion payment


  9. 9
    zman Says:

    SSN trading at $1.10 pre market, down 18% on light pre market volumes (light as of late that is). With the deal delayed but not canned, I will be watching for enough of a hit to add back some shares sold at $1.30.

  10. 10
    zman Says:

    re 8. Yeah, I need to set up a naked mole rat protection fund. Those things are always getting the short end of the stick.

  11. 11
    bill Says:

    what do you think of this link


  12. 12
    blackgold39 Says:

    re 8: lol @ sagebrush

  13. 13
    zman Says:

    re 11. That’s a good one.

  14. 14
    BirdsofpreyRcool Says:

    XACS#1 weighs in early, with a few thoughts (hint, think in longer term cycles… helps to get through the shorter term volatility)


  15. 15
    BirdsofpreyRcool Says:

    “Naked Mole Rat Opportunity Fund”…. good name for a new hedge fund.

  16. 16
    zman Says:

    Nicky Watch:

    Sent Nicky a question this morning:

    Do you buy all the suddenly bullish talk about the S&P 500? People talking higher levels because we broke the 200 day but this looks really extended to me.

    Hi Z

    Yes well I think they are all giving themselves an excuse to now turn bullish even those who were previously bearish – I was just watching Gary Kaminsky on CNBC who falls into that category.

    I actually think we may have a day or two between 1120 (ish) and 1104 before moving up to 1137 and then we will see a correction back to the 1090 area.

    I will tell you that I am starting to prefer a more bullish intermediate term count and that the pullback we see into September/October will not go to 900 but just retrace a portion of the rally that is now underway.

    Its going to be another of those rallies that everyone hates!


  17. 17
    bill Says:

    rrc down in premarket


    NG prices were lower in q2 vs q1 so how can anyone beat?

  18. 18
    BirdsofpreyRcool Says:

    Credit markets continue their march to improvement. Read XAC#1 for corresponding level on SPX (hint — it’s a lot higher from where we are now)

    TED floating back down a bit, now at +33.1 bps. Want to see this get to +25 or so.

    IG trying to tighten through +100 bps… almost there.

    HY trying to rise through 100 pts… about 2 more points to go.

    All is looking Happy-Happy Today in credit. People continue to pour money into fixed income… and i-banks and companies are just pleased to soak up all that liquidity. Eventually, those funds will be put to work… doing something accretive. And “accretive” in the private sector eventually turns into more jobs (if the 800-lb GGG would just step outta the way).

  19. 19
    bill Says:

    tph also with a buy on oas

    Initiating coverage on Oasis Petroleum with Buy rating (OAS – $16.68 – B) – Buy OAS for Bakken leverage, big oil growth (100+% y/y), and near-term well catalysts. Good upside on valuation (32% to our $22/share 3P NAV) with $8+/share option value from de-risking/better EURs. We estimate OAS beats the high-side of production guidance by 10% in 2010 and 5% in 2011. Biggest risks are timing and escalating costs in a tight OFS market.

  20. 20
    zman Says:

    How can anyone beat?

    On gas prices it should just be a matter of the analysts getting the mark to market at the end of the quarter correct. Looks like in RRC’s case they were overly aggressive with the differential.

    BOP – Thanks much for the credit update, helps.

  21. 21
    zman Says:

    Re 19. Thanks.

    RRC call about to start.

  22. 22
    zman Says:

    … and if anyone sees a link to the RRC call that would be great.

  23. 23
    john11 Says:

    None of the dial-in information has changed. To participate in the call, please dial 877-407-8031 and ask for the Range Resources second quarter 2010 financial results conference call. A replay of the call will be available through August 3. To access the phone replay dial 877-660-6853. The account number is 286 and the conference ID is 353994.

    A simultaneous webcast of the call may be accessed over the Internet at http://www.rangeresources.com or http://www.vcall.com. The webcast will be archived for replay on the Company’s website for 15 days

  24. 24
    zman Says:

    Big problem with RRC is how they casually slipped a 25% increase in 2H10 spending out there. Nobody wants to see that right now, especially with gas prices still weak. Costs are coming down / unit so prices don’t have to get back to where they were to generate acceptable levels of cash flow but right now, the nearly pure play gassy companies are their own worst enemy.

  25. 25
    zman Says:

    Thanks John.

  26. 26
    1520sbroad Says:

    premarket volume on HK over 200k shs – is there a note out on them somewhere?

  27. 27
    BirdsofpreyRcool Says:

    Whoa! That was quick… IG CDS index now offered at +100bps. That is 3 1/4 bps tighter this morning… and at a huge psychological level.

  28. 28
    zman Says:

    Those two links don’t go to the actual deal. Anyone have a direct link?

  29. 29
    zman Says:

    Analyst Watch:

    OAS – Canaccord initiates with a Buy rating and $20 target.

  30. 30
    RMD Says:

    OAS is Outperform at Morgan Keegan (target $20) and buy at Canaccord.

  31. 31
    zman Says:

    HK – I see nothing.

    RMD – thanks.

  32. 32
    nifkin Says:

    HK: Merrill up on crossing 200k at 17.10 this AM- dont know how they got that on

  33. 33
    nifkin Says:

    print hit at 08:00AM

  34. 34
    zman Says:

    BP coming off 1.5% early, webcast on going…

  35. 35
    zman Says:

    OAS over $17 but the targets are mostly $20, not leaving them much running room. My sense is that analysts will await their first call as a public company before getting more aggressive (if they do get more aggressive on the targets at this time). There should be 3 or 4 solid Bakken wells to report on the call. Have not seen a call date yet.

    BP – Hayward saying he tried to do the right thing but that the company needs new leadership going forward.

  36. 36
    zman Says:

    BP Q&A starting. Stock down 1.4%.

  37. 37
    1520sbroad Says:

    nifkin – thanks for 32,33

  38. 38
    BirdsofpreyRcool Says:

    Credit market coming off a bit with stocks…

    IG 101 1/2 bps

  39. 39
    zman Says:

    BP talking about shrinking to grow, high grading their assets.

    Not going to disclose the assets for sale or their impact on reserves, production, etc until the deals are done.

  40. 40
    zman Says:

    VLO – Whoa, hold me back. Stock now up 25 cents on the beat. Like I have been saying, so hard to get excited about the indie refiner group.

  41. 41
    zman Says:

    BP Notes:

    Bob Dudley saying that if BP continues its response as it has to date, that it has a lot to offer to the U.S. oil and gas industry. Level headed answer to the question of what they think about the political rhetoric in the U.S. regarding banning BP from offshore activities in the the U.S.

  42. 42
    zman Says:

    Consumer confidence weaker than expected. 50.4 vs 52 expected.

  43. 43
    choices Says:

    Premiums on CEF and PHYS still coming down, gold futures getting whacked this AM, down 15, USD also weak.

  44. 44
    zman Says:

    BP coming off with the market now, not really with comments on the ongoing call.

  45. 45
    bill Says:

    if you like tankers nna is a good long term vehicle for investment

    and if you want to buy nna here is an arb opportunity to make 10 % if nna holds its current price


  46. 46
    zman Says:

    Consumer confidence sparking a sell off now, once again proving that economists just don’t get it.

  47. 47
    bill Says:

    rrc down 9 % taking other ng ep’s with it

  48. 48
    zman Says:

    BP closing remarks:

    Hayward – confident BP will emerge as a stronger, better company under the leadership of Bob Dudley.

  49. 49
    Nicky Says:

    Good morning all. Further to #16.

    Yesterday I talked short term but mentioned I had lots of thoughts intermediate term.

    I am sticking with my short term analysis which just to reiterate is for a top between 28th – 30th June, ideal time would be late Thursday and then a drop into 2 – 3rd August before marching higher again. I think we could be as high as 1126 – 1137 and then the pullback should find support in the 1090 range but maybe not go as low as that.

    Hopefully I am not flip flopping as for some weeks I have been calling for 1150 – 1170. However I will admit that I am changing my stance on what may happen then. I had thought we would then drop hard towards the 900 area in September/October. Yes its still a possibility and we would be looking at an overall ABC correction into that time.
    Until the previous high of 1219 is taken out then I cannot really take that off the table. But due to the cycles another count is gaining my attention which is in fact that the pullback we see into September/October will only be a retracement of the current rally. In other words what we have now is a bullish wave 1 and the pullback will be wave 2. If that is the case then it could be a steep pullback – say 62% of the rally. Anyway I am way ahead here of where we need to be but just wanted to put the bullish count out there as a real possibility.

  50. 50
    zman Says:

    Bill – people are fed up with the apparent return of a lack of capital discipline to the gassy portion of the E&P space. You can almost short any once of them that mentions their budget is on the rise this quarter.

  51. 51
    zman Says:

    Nicky – thanks, you are not flopping. Much appreciate the extra color.

  52. 52
    jat Says:

    RRC’s commentary was worse than that. Mentioned possible dilution in a roundabout way to fund growth, step change for a mgmt team always boasting of their insider holdings.

  53. 53
    zman Says:

    BP call ended with the stock at its LOD of 37.33.

  54. 54
    zman Says:

    Jat – thanks for that, had to listen to BP and am not in RRC at the moment. No wonder the market is puking up their shares.

  55. 55
    jat Says:

    I am shocked. I don’t have a horse in that race, thankfully, but the last thirty minutes of commentary really had me surprised at RRC mgmt.

  56. 56
    bill Says:



  57. 57
    bill Says:


    I didnt come away with the same impression.

    I thought they said they wouldnt issue shares as they own a bunch.

    They mentioned an 80 cent finding cost that they are bringing the “NPV’s forward”

    The quicker you turn over inventory the higher the returns are even with low margins

    Bottom line, we need more demand , and bho should listen to Pickens, and we “the usa” should replace oil with clean NG

  58. 58
    jat Says:

    Here’s what I heard:

    ” The self funding point will depend on a number of factors including natural gas prices, the pace of development and the cost to develop. We understand the concerns of shareholders who worry about dilution through the issue’s of equity. We are with you there as all of us at range have a great majority of our net worth in range stock. However, I would be misleading you if I didn’t expect that all of us would suffer some dilution in the future. I will commit to you that we will do the best to minimize the NAV dilution from where we are to reach the point of self funding. These are extremely exciting times at range. We have a great team of people at range, highly motivated to bring forward the NAV share as quickly and prudently possible.”

  59. 59
    bill Says:

    hk and chk down almost 4 %

    yuck and ng is up

  60. 60
    bill Says:

    58, you take good notes..lol, I stand corrected

  61. 61
    zman Says:

    LINE slipping today, off a little more than other upstream yield names which are mostly off as well.

    Re 59. yeah.

  62. 62
    RMD Says:

    Commerntary on RRC comments helps; can’t really “clarify” a murky answer, but just trust us!

  63. 63
    zman Says:

    RRC – we are increasing our guidance

    Market – but you are spending more and gas prices are still low.

    RRC – but we are outstripping cash flow now so that we can accelerate net present value.

    Market – whatever dude, sell, sell, sell.

  64. 64
    zman Says:

    Energy taking it on the chin with the S&P only off a fraction and commodities mixed.

    VLO call starting, will try to stay awake through it.

  65. 65
    zman Says:

    RRC – of course in the market tomorrow could be a very different day. Could be some downgrades tomorrow followed by bottom fishing. Short term traders are probably not want to hold into the close but may be interested if it gets whacked further on the open tomorrow.

  66. 66
    zman Says:

    SSN down 12 to 15% all morning, not as much of a hit as it could have been. People probably nibbling with the thought that the deal isn’t dead, it’s just delayed, and nothing really has changed. Timing is probably not the only thing that has changed here. I’ve got a list of questions in via email with the company but so far no joy on a return email.

    SSN refund update – still nothing from Schwab.

  67. 67
    zman Says:

    Crude dropping pretty quickly at the moment, at 77.10, fell sharply after failing whole number support at $78.

  68. 68
    zman Says:

    VLO Notes

    Comment on utilization and stock builds.

    We are still in the heart of the gasoline season and we continue to see reasonable exports. But they need to see the economy recover. Exports are not bad, with July slightly down from June but June was strong.

    This makes sense when you look at the distillate side especially. The economy recovery is one of those “no kidding, really???” kind of comments. I’m hearing nothing to latch onto and make me want to buy it. 3Q sounds OK, not great.

    And they haven’t said anything about 4Q but given how overstocked we are on HO at present, the warm weather that is forecast and the fact that the economy is probably not going to be humming in the 4Q then I have to yuck.

  69. 69
    zman Says:

    OAS rolling into red, due to market, and more than that, due to the suddenly down pretty hard day on oil.

  70. 70
    RMD Says:

    JRCO starts OAS with Overweight.

  71. 71
    bill Says:

    on drybulk

    Urs Dur: Bulk freight rates are ticking up off of the bottom; Cape rates may start to improve next week.
    Dry bulk freight rates have been weak for over a month but have been improving of late. While Cape
    rates continue to fall, Panamax and Supramax rates have been improving for a week, slowly pushing the
    BDI back up. A Supramax today earns $18,500/day, while a Capesize, three times the capacity of a
    Supramax, earns $12,500. As well, the forward paper market and the long-term time charter market is
    offering Capesize rates at $26,500/day. Contango in freight rates is generally a positive indicator for nearterm
    rates to rise from lows. As Chinese iron ore inventories start to tick down, and with global dry bulk
    demand firm, we may see slow upward pressure on Capesizes start next week. To rank our dry bulk
    names for next week: NM, BALT, GNK, DSX, NMM, EGLE, and DRYS.


  72. 72
    zman Says:

    BP flat lining down a buck as the market trades off.

    BP says Hayward will NOT testify to the senate hearing on the Locherbie bomber.

  73. 73
    zman Says:

    Bill – your favorite name, DRYS, has a big Pana fleet. Ok, know you despise that name, who is next in terms of Panamax concentration? Last I checked was maybe 6 months ago, DSX had a mostly Panamax fleet. Don’t know how exposed they are to spot though.

  74. 74
    zman Says:

    Headlines hitting now on BP taking a tax credit of $10 B due to the spill in the Gulf which would reduce its contribution to the clean up by that much. Hayward did mention on the call that they were following IRS code and didn’t answer whether or not they had talked with over with the POTUS.

  75. 75
    zman Says:

    VLO call bored me to tears. Stock off 1.3% near the end of it.

  76. 76
    bill Says:

    >IRS code and didn’t answer whether or not they had talked with over with the POTUS.

    lol, if i were him, i wouldn’t say that, it will give barry an idea

  77. 77
    tomdavis12 Says:

    Z: Any thoughts about the 914 production #’s coming out Thurs?

  78. 78
    bill Says:

    egle is 100 % supra max about 55 dwt ships slight smaller than panamax’s

    The current panamax rates are better than capes but are nothing to shout about

    exm has a bunch


    but you have look when they come up again and what rates vs prior

    alot of exm ships come up for renewal this year


  79. 79
    zman Says:

    Tom – Yes, it is unlikely to please gas bulls. Demand should show another strong month on the industrial side however. But, at the end of the day, YoY supply is likely to be close to +2.0 Bcfgpd.

  80. 80
    zman Says:

    Thanks Bill.

  81. 81
    zman Says:

    SSN inching lower now. I wrote this Friday in comments:

    SSN – I sold half of my position earlier this week at $1.30 and am sitting tight for the moment on the rest. That may not be the right call for everyone however and in my normal abundance of caution and helpfulness I present the following non-advisory type thoughts.

    So pick your poison:

    Deal on Monday: Should mean stock goes higher, as long as it is not option C for the acreage (the low end of the range which is now probably nearly priced in (maybe still runs to $1.50 on that deal)).

    No deal on Monday and no word on the deal: Stock off and trickling lower (but not too much) until there is word about the deal. Actually, I don’t think this can happen because they play by Aussie stock exchange rules and have to press release significant events. Of course, since this is in essence the lack of a significant event transpiring perhaps they have an out.

    No deal on Monday but they announce new terms and an extension. Obviously direction the stock takes would be dependent on the new terms but that’s probably more of a negative.

    Deal canceled. Stock gets halved. Maybe not all at once but it would take a sharp drop on the open.

  82. 82
    zman Says:

    Bill – SD on the tape getting approval for a new campus downtown OKC. I’m not sure people want to hear about that kind of thing right now, not sure with all they have on their plate that tearing down 6 buildings and building a gleaming new one should be on the todo list at the moment.

  83. 83
    blackgold39 Says:

    BP trying to comeback

  84. 84
    tomdavis12 Says:

    Z: Will it be bigger than Aubrey’s? 8 )

  85. 85
    elduque Says:

    The campus was discussed at the last conference call.

  86. 86
    choices Says:

    Z-have you seen anything on WLT-getting whacked fairly heavy, down almost 6%.

    maybe just the mkt tone.


  87. 87
    Nicky Says:

    Metals taking a thumping today. Is VTZ about? Be interested in his take on the action in metals.

  88. 88
    Nicky Says:

    Indices – volume was greater on the downside today than it has been on previous up days where frankly it has been pathetic.

    It is likely that if another high is still out there and the technicals remain weak then we should see a correction off that high.

  89. 89
    jat Says:

    re 86, PCX had a bad quarter, also sector lagging as well

  90. 90
    Nicky Says:

    I will just add that if the 1104/1105 area is breached then likely our correction is already underway and will find support anywhere from 1099 (38%) to 1086 (62%).

  91. 91
    zman Says:

    Concur with Jat on the PCX comment. Would add that both BTU and PCX have pointed to firm demand and falling inventories both in the U.S. and in China… so PCX may have had a bad quarter but that doesn’t translate into WLT having one.

    Watching WLL come off sharply with crude. Considering adding another bit of stock there in the ZLT.

  92. 92
    zman Says:

    Who is the UBS analyst who initiated on OAS today with the headline “You’re My Wonder Well”? A reference to the boy band that thinks it’s bigger than the Beatles. That’d get you in trouble in Texas.

  93. 93
    zman Says:


    Added the met coal leveraged producer WLT for $68.92. The stock has been to $100 and as low as $60, all this year. Recent comments from BTU and other producers and my own work on EIA data and anecdotal evidence all continue to point to firm coal markets and still higher met coal pricing. I’ve had no exposure in the ZLT to coal stocks in quite some time and am seizing on today’s weakness (profit taking after a recent bounce and reduced guidance by PCX) to rectify that. WLT reports on after the close tomorrow and remains discounted to a majority of it’s peers.

  94. 94
    zman Says:

    With 20 minutes to the close of NYMEX we have:

    Crude down $1.50
    NG is up 3 cents, no tropics, just heat.

  95. 95
    choices Says:

    thanks, jat, Z

  96. 96
    bill Says:

    82 you are 100 % correct

  97. 97
    zman Says:

    As is ElD, they have talked about it before. I’m just saying it’s not what people want to hear about, any more than they want to hear about the boat shaped crewing facilities named after CHK and DVN.

  98. 98
    zman Says:

    The following is taken from the BTU call at the beginning of earnings season and I agree with it all on China and it gives you more of why I’m long WLT as a stock now.

    Now, one area I would like to discuss is Chinese growth. You know there is a certain deja vu element to this roller coaster views about China’s economy. We have long observed the recurring syndrome. China announced it’s targeted growth rate of 8%, the economy outpaces that growth leading to investor skittishness. The government then announces cooling measures to ensure sustainability of growth, but nervousness increases. And finally when the accounting is finished, GDP is growing 9 or 10%, and then the cycle repeats itself. So we regularly expect 8 to 10% plus GDP growth out of China and haven’t been disappointed in any of the past 10 years. Amid the global financial crisis, China even managed 9% growth. In the first half of 2010, GDP grew 11.1%. Now as China lets its foot off the gas just a bit, 2010 GDP estimates have been revised to 10% The U.S. should even be one third so lucky.

    Let me offer a few key China data points which we think support the long term energy and coal demand trends. First of all, the simple fact is that yesterday’s announcement that China has become the world’s largest energy consumer is profound. The U.S. held that position for over 100 years. And underneath this some have been concerned that China’s auto sales are easy, but consider that June sales are up 25% from a prior year which itself was up 40% over 2008. GM has announced that it is selling more cars in China than in the U.S. and this year China will sell more cars than any nation ever. The China’s steel intensity per capita is increasing but remains at just half or less than of the U.S., Japan, and South Korea. And China will ultimately pass these nations in steel intensity as housing is being built up versus out. There are hundreds of millions who need air conditioning and appliances that take steel to make and power to run. Also this year, China will pass the U.S. as a leading manufacturer.

    China has also just announced a 30 billion dollar investment in the nation’s transmission grid system to further expand electricity availability. China’s power demand growth in June was double digit again and year to date generation is up a robust 19%. So all of this translates into China’s coal demand growing at a rapid clip and coal imports continuing at a record pace. The June numbers just out show another impressive month with China net imports totaling 11 million tons.

  99. 99
    cargocult Says:

    An aug $70 WLT put sells for $4.40 at this time. Like putting a bid in at 65.70.

  100. 100
    1520sbroad Says:

    #98 – CSX comments (and likely NSC this afternoon) will echo BTU’s.

  101. 101
    zman Says:

    Jat – got any thoughts re NBR quarter?

  102. 102
    zman Says:

    Thanks 1520.

    One of the knock on met coal at the moment is the whole “China is slowing” argument, that this has depressed prices after the 2Q period. WLT hedged a good piece of its out for longer and more per ton than the numbers mentioned in the story above.

  103. 103
    zman Says:

    Tow boat hits well in the shallows, oil spewing. I guess we should ban all tug boats.


  104. 104
    1520sbroad Says:

    #98,100,102 – as with many investments I think it comes down to timeframe. The timeframe for China buildout is not measured in Wall Street quarters but in decades. I keep coming around to future gasoline demand for all those cars in China – staggering.

  105. 105
    zman Says:

    1520 – that and the fact that they complete the equivalent of an industrial city each month, complete with power supply…

    BP says pressure still rising slowly in wellbore. I wouldn’t be surprised to see the name rally as we approach more well killing operations early next week.

  106. 106
    zman Says:

    Gibbs should get one of those life sized card board cutouts of himself and a tape recorder. White House says BP must clean up the Gulf no matter who is in charge. If I were in the press room I’d ask him if the president is looking for whose “ass to kick” regarding that other leak, the leak in Afghanistan.

  107. 107
    zman Says:

    Anyone see anything on ESV, stock starting to run.

  108. 108
    zman Says:

    ESV could be a takeout. They’ve been trying to buy some rigs from weaker players during the moratorium, would make sense that they are a target.

  109. 109
    zman Says:

    ESV – took a little $46 call position on a hunch. Not even going to ZTRADE or ZBLAST that out as … it’s a hunch. Will let you know if I dig in anything up … in at $0.60.

  110. 110
    blackgold39 Says:

    Z — Aug ESV 46?

  111. 111
    zman Says:

    JB – when you get a chance could look at ESV, sort of interesting as it comes out of a base and breaks through the 200 day.

  112. 112
    blackgold39 Says:

    already up to 0.80, nice

  113. 113
    zman Says:

    BG – yeah but I’m not putting that one in the official pile as its only a hunch.

  114. 114
    zman Says:

    ESV – lot of volume at the tome of this little run in the last 15 minutes. Volume both on the up and on the down side now, probably an unsubstantiated takeout rumor being spread. So far I have not got anything from the usual dark corners out there of a rumor.

  115. 115
    blackgold39 Says:

    Z — What did you get into the Aug 40’s for? I am looking at jumping back on them, asking 1.16 currently

  116. 116
    zman Says:

    ZLT Comment: May take more WLT post earnings (so sometime next week). Happy to have a little coal exposure for the long term. Have been thinking to add a little more diversification and may change out one of the Bakken names for EOG (which also gets me Niobrara and some other interesting plays) as well as booting SSN if they don’t square this deal away in short order.

  117. 117
    blackgold39 Says:

    I am feeling the heat needing to get back in prior to kill

  118. 118
    zman Says:

    BG 39 – BP $40 Augusts, in at $1.70.

  119. 119
    blackgold39 Says:

    any nasty macro indicators that could come out tomorrow and bite me?

  120. 120
    Jerome Blank Says:

    RE: #111 ESV, trading right up against P&F trendline resistance at $44, a $45 print breaks the bear P&F trendline…

  121. 121
    zman Says:

    Tomorrow is durable goods and late in the day Beige Book. Could be hinky around the release of the later.

    Thursday = jobless claims = always a potential land mind

    Friday = 2Q GDP. Lots of nervousness around this number, now thought to be in a range of 2 to 2.5%. Below 2.5% and we probably get a sell off. Also weakness that day can come from PMI and Consumer sentiment, both of which economists have pretty high.

  122. 122
    blackgold39 Says:

    I think I am going big into the 40s. No better time than present

  123. 123
    blackgold39 Says:

    filled at 1.13

  124. 124
    blackgold39 Says:

    What time is Beige Book data released?

  125. 125
    zman Says:

    Thanks JB, that was fast.

  126. 126
    zman Says:

    re 124, 2 pm EST

  127. 127
    zman Says:

    BG39 – am a bit surprised BP has not turned green on the day, sort of thought it would. No matter, should be a pre game static-kill rally later this week.

  128. 128
    zman Says:

    BG – one of other factor would of course be the weekly inventory reports.

  129. 129
    crysball Says:

    Re: Steam Coal
    To comply with emissionons requirements here in IN & IL multiple Coal fired electric genereating facilities are converting to powdered coal fed into furnaces via a fludiized bed process, and installing improved scrubbers.

    Previously these utilities have been buying low Sulphur coal from the Powder River Basin and paying high rail rates [monloply rail service].

    Now these same utilities can use locally produced [Southern IN & Southern IL] produced coal [known as Brazil Block] which has higher sulphur and is less expensive plus far less costly to transport………resultinging in a VIRTUAL BOOM in local [non-unionize] coal mining, most of which is privately owned. Even big coal [BTU] is getting into the act. They have a new trick, where they close their union mines, wait 1 year, form a new corporation and start back up as a Non-Union facility.

    Voted WLT

  130. 130
    blackgold39 Says:

    I will wait on that to unload the 45s for sure, they seems somewhat dead without a catalyst

  131. 131
    zman Says:

    Sounds like the new Bummer Dept needs a rule book:

    From an ESV story a few days ago

    Chief Executive Dan Rabun said there were no guidelines for completing the recertification, leaving Ensco’s deepwater group to come up with their own approach.

    “Whatever the process that we worked out seems to be a process that’s working,” Rabun told analysts on a conference call. “It may or may not be the same process anybody else is following.”

  132. 132
    Jerome Blank Says:

    BP has an interesting 30 min chart…updated

  133. 133
    blackgold39 Says:

    JB, can you link me?

  134. 134
    zman Says:



    This is always available at upper right in the link list.

  135. 135
    blackgold39 Says:

    Thanks guys

  136. 136
    Jerome Blank Says:

    Re: #133, blackgold, please refer to the chart book pulldown and look for 30 min BP…


  137. 137
    zman Says:

    re 136 – that’s the only time a wedgie is a good thing.

  138. 138
    zman Says:


  139. 139
    blackgold39 Says:

    JB, does that look bullish to you?

  140. 140
    blackgold39 Says:

    Looks like the post-Siberian transfer unknown

  141. 141
    Jerome Blank Says:

    RE: #139, blackgold…it does, hard to make much sense out of the daily, but dialing down, BP looks like it’s winding up, and if it does breakdown, stops are easy to manage below the lower trendline…

  142. 142
    elduque Says:

    Off island to the mainland, for 4 weeks. Have fun. Thanks to one and all, especially you Z.

  143. 143
    RMD Says:

    OAS: Simmons starts with an Overweight.

  144. 144
    blackgold39 Says:

    Yeah, traded in tighter and tighter range all day, made the EOB trade work out without a ton of stress….until tomorrow AM

  145. 145
    zman Says:

    Have fun ElD, don’t forget to check in.

  146. 146
    zman Says:

    Thanks RMD.

  147. 147
    zman Says:

    More on BP’s tax credit:


  148. 148
    zman Says:

    LINE announces 2Q distribution, same as usual, as expected.

  149. 149
    blackgold39 Says:

    Seems that credit would have had to have been expected…..expecting BP not to take it would be like expecting the average taxpayer not to claim deductions, or the average corporation not to cite a loss and accept the tax relief.

    Not a lot that can be done about this from Barry’s standpoint without BP-specific or oil spill-specific legislation riders.

  150. 150
    blackgold39 Says:

    Not that it will stop they from talking about it.

  151. 151
    zman Says:

    API says crude stocks up 3.08 mm barrels. Pretty much the opposite of the what the Street is looking for tomorrow,
    Gasoline up 877,000,
    Distillates up 407,000

  152. 152
    zman Says:

    XEC coming across the tape …

  153. 153
    bill Says:



  154. 154
    bill Says:



  155. 155
    West Says:

    http://phx.corporate-ir.net/phoenix.zhtml?c=136094&p=irol-newsArticle&ID=1452633&highlight= XEC out after the close with their operational update. Looks like production up just 10 mmcfgepd from end of first quarter on average daily production over the quarter. Although no exit rate was given for 6/30/10. The Mid-Continent averaged 248.4 mmcfe/d, Permian at 155 mmcfe/d and the Gulf Coast at 190 mmcfe/d . Average daily production for XEC during the second quarter was 594 mmcfe/d consisting of 371 mmcf/d, 10,792 bngl/d and 26,381 bo/d. I was looking for around 700mmcfe/d exit rate so I missed the number by quiet a bit. Production totals from the Yeagua were down about 10% from 1st qtr mainly due deceased production from the Jefferson Airplane Structure.Decline curve starting to kick in most likely. Although amazingly the Two Sisters #1 still making 37 mmcfepd after being on production for a year. One item that we need additional information about is pipeline capacity which has previously restricted some prodution. Overall the market may be looking for larger production increase than shown and will tell us tomorrow. XEC top end guidance for the year 2010 is about 595 mmcfepd. Second quarter cc next Wednesday, 8/4/10 at 10 cdt.

  156. 156
    zman Says:

    Thanks West, 2 Sisters = unreal. .

  157. 157
    zman Says:

    HES buy AEZ

  158. 158
    VTZ Says:

    10% premium ??? makes no sense?

  159. 159
    VTZ Says:

    Nicky… just saw your comment from before. I'll comment on the metals tomorrow… essentially this is the last takedown.

  160. 160
    zman Says:

    It's not large, working through it now. Note the language about the possibility of a dividending out of their working capital. At the end of Q1 that stood at near $74 mm. With 62 mm fully diluted shares out that's an added $1.18 per share. Obviously they spent some money in the quarter on both land acquisition and drilling so I'd think we could see a dividend of another $0.40+ per share. But still not a big premium.

  161. 161
    West Says:

    AEZ deal seems to be on the low side. NFX and WLL have large acreage positions offsetting AEZ property so we might see some additional interest. Acquistion action is heating up especially in the Permian Basin with the announcement of 6.6 Billion $ of deals in the last 2 weeks. APA to pay BP  3.5 B for Permian assets and this to me is the best deal of the decade for all of this under-developed acreage in one of the more mature basins in the States. This along with their Mariner acquistion in the PB should put them # 2 behind OXY. There is alot of this acreage that has been HBP for over 50 years and is shallow San Andres production but the lease holds all depths, not mention that they will get over 450,000 mineral acres, that is a legacy asset. …..CXO purchase of Marbob at over 1.5 B will give them greater exposure to the Bone Springs which is offering higher ROR than Wolfberry play if you are the right area. Looks like that we are going to be able to comingle 4 zones now and have the WOLFBONE. This is going to make the economics work on a much greater area than was previously profitable……SD acquistion of ARD 1.6 B and SD is leasing everything running on trend from Ector , Andrews and Gaines Co.. Most people looking from afar think that SD is in way over their asset base or ass as the case may be, but there is also the larger Wolfberry play that has moved into these 3 counties lately and local CWEI has made some very good wells along the eastern side of Andrews Co. SD has had talks with several large block holders with HBP production that may happen if they can get the price right. Energen acreage that was only acquired last year is said to be the primary target.A lot of the other producers are independents that don't show up on anybod's radar. This all begs the question of where does the money come from for the SD fearless venture into debt……..It just makes me think that at some point SD has to do some type of partnering on their Overthrust acreage and they would like to limit that to only one portion of their  large acreage position, Pinon Field. The money parties able to smell stress would probably push hard for position in exploratory areas also. SD definitely not a stock for the faint at heart.

  162. 162
    bill Says:

    It just makes me think that at some point SD has to do some type of partnering
    Id have to agree. Tom Ward seems to want the whole thing.
    Sd debt is over 2.6 b at 9 % int 235 m per year if production is 100 bcf thats a 2.35 burden for every mcf
    Thats 2 acquisitions now where i dont get a decent premium  ard & aez

  163. 163
    bill Says:

    aez seems to be trading at par with he offer

  164. 164
    zman Says:

    Wednesday post is up

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