28
Jul
Merger Wednesday
Merger Watch: AEZ bought by HES for a smallish premium. May light a brief, small flicker under the smaller Bakkens today. We own AEZ in the ZLT (see details in the Stuff section) but not for long. We also hold BEXP, KOG, OAS, and WLL that could get a little play on the announcement.
Market Sentiment Watch: Lessons from the E&P sector quarter to date: 1) Do not raise spending levels 2) If you do, make sure the bump is far outweighed by evidence of bigger production growth AND much higher margins going forward, but 3) Do not raise spending levels. RRC did #1 without gaining that much in #2 and go sent to the penalty box for it (see price target cuts on RRC in the Odds and Ends section today). If we see much more this quarter we will have to conclude that the E&P realm is not paying attention to what investors are saying at present. Which is 1) wait for higher prices before you add that next set of 10 rigs, 2) hedge, 3) pay down debt, 4) get spending within your cash flow. All of that applies more to gassy names than oily ones but given the precarious nature of the economy, and therefore oil prices, I have to say that the oil-centric E&Ps need not get irrational exuberant with their budgets at this time either.
EcoData Watch:
- Durable goods for June came in at -0.6% vs 1.0% expected (I wouldn't prop up a corner of my desk these days with the flotsam being produced by the economist community of late for fear it would collapse)
- Beige Book due out at 2 pm EST
BP Spill Watch:
- U.S. to launch criminal probe into the relationship between the MMS and BP, HAL, and RIG. Not sure why the last two are on there other than when you conduct a witch hunt you cast a wide net.
- Also, DOJ and SEC are probing trading in BP shares surrounding the spill.
- Last piece of casing will be cemented in place between today and Sunday, with BP targeting Monday for the Static Kill operation.
- NOAA says oil from Macondo rapidly degrading, "loop current threat" to east coast diminishing.
- Diagram of the relief well
- Oil spill tax credit
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today – Bye, Bye AEZ, NBR, BRY,
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $7,300
- 75% Cash
- Yesterday’s Trades: None
ZIM (Zman Inefficient Markets portfolio)
- $1,400
- 12% Cash
- Yesterday’s Trades: None
ZLT (Zman Long Term portfolio)
- 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.
The ZLT as it now stands:
Commodity Watch:
Crude oil tumbled $1.48 to close at $77.50 yesterday. After the close, the API released a bearish across the board report (see below). This morning crude is trading off another 50 cents.
Natural gas edged up another $0.06 to close the day at $4.68 yesterday. This morning gas is trading up a penny. Gas remains range bound.
- Imports: Up 0.5 Bcfgpd week to week.
Early Read On Natural Gas Storage: Street is at 32 BCF for tomorrow’s report. I'm at 35 Bcf
- Last Week: 51 Bcf Injection
- Last Year: 70 Bcf Injection
- 5 Year Average: 54 Bcf Injection
- 10 year Hi: 81 Bcf Injection
- 10 year Low: 19 Bcf Injection
Oil Inventory Preview
API Watch: Bearish report.
- Crude: UP 3.08 mm barrels
- Gasoline: UP 877,000 barrels
- Distillates: UP 407,000 barrels
Stuff We Care About Today
Bye, Bye AEZ ... You Went Too Young
- For a full run through on AEZ, a nascent, west of Nessen, Bakken player, see my initial write up here.
- Deal valuation is relatively simple given AEZ's clean balance sheet and focus.
- Some more thoughts:
- The premium is low. If this thing had the normal deal discount there would not be much if any run in the shares today. But given that management is onboard with the deal it may run to almost full price. In that event, I may punt immediately and reallocate the funds to the next perceived Bakken target.
- I do want to be thoughtful about the potential for the stock to be tied to HES now and HES has a call at 10 am EST to discuss their 2Q results (they reported a 2 cents beat this morning).
- The press release mentions the possibility of a cash dividend based on where working capital stands at the time of the deal:
- As of their 1Q report working capital stood at $73.7mm, with $73.9 mm of that in cash.
- They've been busy boys in the interim so not all of that will be available for a dividend.
- Also, the language in the PR is rather vague and they did say "possible"
- But if we go with the shares outstanding at present, and we assume that they went land acquisition crazy since the end of the last quarter, spending $50 mm all in (including drilling) then you could be looking at a dividend on the order of $0.40+.
- Finally on this matter, note that the deal doesn't close until 4Q. Meaning the working capital could be gone or at least severely eroded by then. Again, this leads me back to my earlier comment about punting the initial pop (this is my play) and reallocating.
- As of their 1Q report working capital stood at $73.7mm, with $73.9 mm of that in cash.
- Price per acre works out to $5,400 which seems low to me but that could be attributable to AEZ's acreage being still relatively unproven.
- The WeeBaks are likely to be most affected by the deal including KOG and NOG and to a lessor extent OAS, BEXP, WLL, and CLR.
- The premium is low. If this thing had the normal deal discount there would not be much if any run in the shares today. But given that management is onboard with the deal it may run to almost full price. In that event, I may punt immediately and reallocate the funds to the next perceived Bakken target.
NBR Chalks Up A Small Beat
The 2Q10 Numbers:
- Revenue of $918 mm vs $876 mm expected
- Contract drilling margins still declining but flattening with some light at the end of the tunnel.
- EPS of $0.19 (ex items) vs $0.18 expected
Highlights:
- “I believe the second quarter marks the start of a steady upward progression in our business." ~ NBR CEO Isenberg. Last quarter's CEO comment was more subdued.
- North American rigs were up 14 to 172.3 for the 2Q average and are at 179 (175 of them active and 4 being terminated) at present.
- Expecting modest rig count and dayrate improvements as the year progresses
- "With rig hours continuing to increase, we anticipate further rate progression, which should serve to more than offset the recent cost variances and return this unit to robust sequential growth. " ~ comment on US land.
- Seeing adds in the hot shale plays, they are still market share leader in the shales
- On the international front, operating income continues to grow and they see quarterly rig adds through 2011 but the pace of growth will be lower in the second half of 2010 due to continuing delays in Mexico and greater competition in Saudi Arabia.
Conference Call: Today, 11 am EST
Other Stuff:
Earnings Wrap For The Season To Date:
- RRC - as previously mentioned, a boost in the budget and hints of dilution down the road spooked investors, who barely noticed a boost in volume guidance, and who sent the shares down 7%
- VLO beat estimates, espoused cautious optimism and ended the day down slightly as investors yawned at the outlook.
- PCX (the coal company) narrowed its loss to expectations but cut planned volumes, something no one likes, which prompted a 10% slide in the shares.
Nutshell: Don't spend more, don't deliver less and don't be too cautious sounding. This goes back to the beginning of this quarter as well if you look at the difference in the HAL and SLB post earnings release trading.
LINE Distribution Unchanged, as expected
BRY Conference Call: Today, 10 am EST
- Bottom line scores a beat but it was, financially, a messy quarter
- 2010 Guidance maintained
- Planning to listen, but no interest in the name at this time.
QEP earnings call, 11 am EST.
Tomorrow we have a boatload of names reporting: WLT, OII, PXD, WLL, CRR, LINE, FSLR. As I will be traveling tomorrow I will look over any that manage to report before about 4 am Thursday.
The rest of the week's earnings calendar can be viewed here
Odds & Ends
Analyst Watch:
- CRZO - raised to Outperform at BMO
- RRC - target cut $4 to $63 at Rodman, maintains Outperform
- RRC - target cut $11 to $45 at Barclays, maintains Equal Weight
Housekeeping Watch: I will be away from the office Thursday and most of Friday and again mid next week. BOP and Nicky will be in charge.
AEZ to trade off HES today and going forward. I’ll be in AEZ though the HES call but don’t plan on holding much longer. It would take a $5 rally in HES to double the premium of the deal to yesterday’s AEZ close. Interested to hear more details about the potential dividend as well. My sense is that the deal was probably penned when AEZ dipped to $6 last week, so if they kept the same multiple you would have been looking at a much more attractive looking premium. Still think AEZ is selling itself too cheaply here.
July 28th, 2010 at 8:07 amLong time MLP sector penalty box dweller APL out with a big asset sale this morning. Selling their Elk City system to Enbridge for $682 million. Will pay down debt and reinstate the distribution in Q4 2010. And there was much rejoicing.
APL is going to concentrate on their opportunities in the Marcellus with thier parent company ATLS.
July 28th, 2010 at 8:14 amAnalyst Watch:
OAS – Raymond James initiates with a Strong Buy
July 28th, 2010 at 8:24 amSite loading very slowly here.
July 28th, 2010 at 8:26 amng up 15 cent
July 28th, 2010 at 8:28 amrefresh slow here too
July 28th, 2010 at 8:29 amSite slow, I know, should be temporary. We have not yet upgraded to the new server.
July 28th, 2010 at 8:29 amDon’t know reason for move on natural gas, don’t see anything brewing in the Gulf or Atlantic. Our forecast just got revised hotter, again, so it may be that.
July 28th, 2010 at 8:36 amAEZ up 8% on the open, HES flat. Call in 20 minutes.
July 28th, 2010 at 8:37 amXACS#1 wieghs in with some thoughts on the market (George Soros must be sooo proud…)
http://www.capmarkets.com/ViewFile.asp?ID1=141308&ID2=429966521&ssid=1&directory=6571&bm=0&filename=07.28.10_Attack_And_CBO_says_Short_the_USA.pdf
July 28th, 2010 at 8:40 amAEZ — way to pick ’em, z!
You know… there is little that is more EXCITING than to wake in the morning and see that little your company has just been eaten by a larger fish. Kinda gets the blood flowing… makes you wanna go find the NEXT one.
July 28th, 2010 at 8:51 amBOP – glad someone noticed, thanks. Glad I’m going on vacation.
July 28th, 2010 at 8:51 amAEZ: it worries me that the small premium connotes these Bakken-minis have most of the upside priced in already. I will try to get insight into why mgt sold now vs. in a year or two (realizing they need cash for capx right now).
July 28th, 2010 at 8:52 amSD seems to be outperforming CHK since the deal.
So… what is more “contrarian” these days… conventional nat gas? Or GoM nat gas? Or uranium??
July 28th, 2010 at 8:52 amThanks RMD, HES call may shed some light on that in a minute as well.
I do think the small premium relates to the recent dip (so it would have been bigger if not for the run of the last couple of days) and to the fact that much of AEZ’s land is not yet proven up. 3 wells so far is not much to stake a claim in 85,000 acres of would be moose pasture. I’m betting that management gets enough out of the deal to build another one from the ground up. Who knows, maybe they are the SSN Niobrara buyer.
July 28th, 2010 at 8:55 am(few problems with the placement of “little company”… but, you get my meaning)
Seriously… by FAR the COOLEST thing EVER in the high yield mrkt was to wake up to find your B3/B- company was being bought by a AAA company. Happened to me only once. But you just LIVE for that stuff.
Kinda surprised that AEZ didn’t go for a tad more. I think wcoaster had a great back-of-envelope model on AEZ that put “value” closer to $9. Wonder if we will see other sharks start to circle…
July 28th, 2010 at 8:56 amtom ward of sd to be on cnbc at noon today
July 28th, 2010 at 9:00 amHeadTrader musing that if we can hold and consolidate in here… might see some money looking to be put to work in August (which is just next week). People still looking to SHORT stuff. So, if money starts to flow in on the long side, the shorts would just be fuel on the fire….
July 28th, 2010 at 9:02 amAlso, nice swap from EXXI into OAS. Looks like you’re outperforming there too.
Hearing more contrarian and deep deep value folks whispering the words “SD,” fwiw….
July 28th, 2010 at 9:04 amSite should no longer be slow. Disabled one of my tools whose site was down. Who needs tools like that?
Agreed BOP, may see some sharks.
HES trading up because the quarter was good and this is such a small bite for them.
HES call starting now.
July 28th, 2010 at 9:04 amreload is fast now
July 28th, 2010 at 9:05 amHES on AEZ
Well, they just mentioned it.
In the Paris Basin they have > 1mm acres and will drill 6 wells in 4Q.
… expect more in the Q&A…
July 28th, 2010 at 9:10 amOh “Par,” we knew you far too shortly…
IG back to 104 1/2 bps, out 1 3/4 bps this morning
HY 97 11/16 ptx, down 9/32 pts
would love to see both HY and IG cross at 100. Just something to look forward to.
TED still drifting slowly, slowly back toward 25… hovering around 32.5 bps this morning.
July 28th, 2010 at 9:13 amMorning all. Support at 1106 – 1108. So far move down looks corrective which indicates another move up before we go down. That said we are running out of time on the upside cyclically.
July 28th, 2010 at 9:13 amBOP – thanks for the credit, always helpful.
Probably should have put CRED in the list of names that could scoot on the AEZ takeout.
Nicky – how much time have we got?
July 28th, 2010 at 9:15 amAnalyst Watch
BEXP – don’t have any details but Global Hunter picked up coverage on BEXP with a Buy this morning.
July 28th, 2010 at 9:16 amWell we are in the timeframe between now and Friday for a top. The astro pointed to late Thursday.
July 28th, 2010 at 9:18 amCIGX — honestly was hoping it would drift back down. Monday’s run up was that crazy “someone’s-gonna-buy-them” rumor that pops its head up periodically. Seriously, the drama between the shorts and longs is getting to a fever pitch here. Will break in one direction or the other. Wonder if inVentive launches before the CIGX 10Q is put out. Company burns through about $5mm of cash/quarter with no discernible revenues (hence, the short-thesis). So stock price is a random walk (or, a Manipulated Walk) until we get some of the fundamental news we are all waiting for.
Personally, happy to see it on sale this morning. Still have some shares to buy…
July 28th, 2010 at 9:18 amOil numbers in 15 minutes. Again, not a real good feel for the numbers this week. Expecting imports to come off a bit and thinking API was reflecting the prior week’s surge in imports (a week late and several thousand barrels short)
July 28th, 2010 at 9:19 amwhich ng stock is down 25 % in the last 3 months and in that time period is more unloved than sd
http://finance.yahoo.com/q/bc?t=3m&s=SD&l=on&z=m&q=l&c=hk
July 28th, 2010 at 9:22 amHES on AEZ comments
85,000 net acres, west of the Nessen. Lot more drilling left to do before we talk, not going to update guidance yet but we are clearly excited about it.
ZComment: That’s pretty lame, nothing new. But they are excited about the land which is in the northeast corner of what we call BEXP’s Rough Rider.
More questions on the acquisition:
Risked Resource?
They plan use AEZ 3 current rigs but to mow down the acreage with dual laterals
…
July 28th, 2010 at 9:22 amHES – declined to comment on risked resource on AEZ’s land.
Analyst Watch
WLL – Global Hunter also picked up WLL, who reports tonight, with a Buy.
July 28th, 2010 at 9:23 amYeah but Bill, that doesn’t mean it makes sense.
July 28th, 2010 at 9:24 amHere’s the link to Global Hunter’s morning piece. Hope they don’t mind my posting. But, think their senior guys (Michael, Ravi, Bo) are pretty good. So, always worth reading.
http://www.capmarkets.com/viewfile.asp?ID1=0&ID2=0&directory=13887&filename=GHS_Dirty_Energy_Daily_2010-07-28.pdf
July 28th, 2010 at 9:28 amHES on the Liability Cap
Saying they support one of the proposals that is $1B cap, then a fund to take over about that.
July 28th, 2010 at 9:28 amThanks BOP
Oil numbers in 1 minute, oil off 80 cents at 76.71.
July 28th, 2010 at 9:29 amJB – can you look at HES?
July 28th, 2010 at 9:29 amEIA Inventories
Crude up 7.3 mm barrels due to a huge build in imports at 11.2 mm bopd.
Gasoline: UP 0.1 mm barrels
Distillate: UP 0.9 mm barrels
….
July 28th, 2010 at 9:31 ammore EIA
Big jump in demand to a new high for this year.
Gasoline at 9.632 mm bpd, well above the range.
Distillate: at 3.6 mm bpd, still weak.
…
July 28th, 2010 at 9:32 amGlobal Hunter’s initiation piece on the Bakken is titled “Bakken Bits.” That’s FUNNY.
July 28th, 2010 at 9:32 amWhat’s with those imports
July 28th, 2010 at 9:34 amOil testing $76 at the moment, but given that the surge is imports and given that gasoline demand is much better than expected, the dip is probably the wrong move for oil at the moment.
July 28th, 2010 at 9:34 amAnalysts expected oil inventories to DROP by 1.73mm barrels. Guess no one is paying close attention to the ports…
July 28th, 2010 at 9:34 amZ – Good job on AEZ, but I think HES cut you short. Did they comment on the special dividend to AEZ holders at all?
July 28th, 2010 at 9:35 amre 40 … and I thought my WeeBaks was clever.
Jat – don’t know, that’s not a sustainable rate. With imports being lumpy it could be more of a “govt. estimate” than usual.
July 28th, 2010 at 9:36 amRe 42, I also can’t see the gasoline demand on bloom yet. See it in the PDF.
July 28th, 2010 at 9:39 amre 44 – Thanks, agreed, and no they did not.
Oil coming off those lows. No one is going believe that imports number isn’t reversed out of the data next week.
Looking at the stock build it was largely on the Gulf Coast (Cushing actually fell) so maybe it was a “better get to port before Bonnie smacks up” surge.
July 28th, 2010 at 9:39 amCrude back up to 76.50 from the original knee jerk below 76.
July 28th, 2010 at 9:40 amPetra tells me the charts section tomorrow is going to be brief because I still haven’t packed. I take 10 minutes to pack no matter where I go but alas the interns do not.
July 28th, 2010 at 9:41 amZ: Summary of comments made by Ole Slorer @ MS today. With the combination of rigs leaving the gulf and uncontracted newbuilds coming from shipyards, day rates likely to be soft into 2012. ( I agree but much of this is priced in ). Still has a buy on SDRL, RDC, and RIG. Expects utilization to trough mid-2011. Over the next 12 months the sweet spot is the service space SLB, HAL, BHI and WFT. In equipment he likes CAM and TS. Good call on AEZ Z. BOP you always make good calls.
July 28th, 2010 at 9:41 amThat RayJay target on OAS is $23.
July 28th, 2010 at 9:41 amBP off a nickel now, whose afraid of multiple criminal probes, lol.
July 28th, 2010 at 9:42 amHES Q&A.
AEZ didn’t want cash, they wanted HES stock.
July 28th, 2010 at 9:43 amThey are running for sure
July 28th, 2010 at 9:44 amMy HES counterpart tells me he thought ~$5200/ac was pricey, but I disagreed.
July 28th, 2010 at 9:45 amThanks BG39
ESV not apparently in play today and Morgan Stanly cut the group today. Ouch on my unofficial trade yesterday.
July 28th, 2010 at 9:47 amBP Aug 40s looking like a complete steal right now
July 28th, 2010 at 9:49 amJat – anything strike you as interesting from NBR?
July 28th, 2010 at 9:51 amDoes anyone see any broker comments on AEZ this morning? Would be good to get some details from them on calculation of the “possible” dividend. Timing shouldn’t matter (it’s probably at the time of the deal) as the shares should discount it.
July 28th, 2010 at 9:56 amRE 59 – Doesn’t seem like there’s any discount in there at all yet.
July 28th, 2010 at 9:57 amZ: Does anyone win anything with AEZ or do you have to pay yourself? No comments on AEZ from my places.
July 28th, 2010 at 9:59 amAEZ – Law firm already lined up to sue them for fiduciary breach.
July 28th, 2010 at 10:00 amWhoa, make that 3 law firms.
July 28th, 2010 at 10:01 amOff topic…
Bloomberg has a new quote, every morning when you log on. Particularly like the one this morning…
“Be pleasant until ten o’clock in the morning and the rest of the day will take care of itself.” — Elbert Hubbard
HeadTrader just hates that quote… 😉
July 28th, 2010 at 10:02 amBOP – Tell HeadTrader that Elbert got his in the end, he went down with the Lusitania.
July 28th, 2010 at 10:08 amZ — whats your source for BP news on relief well?
July 28th, 2010 at 10:08 amso far, three law firms announce investigation of AEZ Board-breach of fidiciary duty to shop the company.
July 28th, 2010 at 10:09 amZTRADE – ZLT – AEZ
AEZ – Sold all for an average $7.135, up 33% since entry in late May. See site for further details.
July 28th, 2010 at 10:11 amBG39 – re BP – just the morning updates and my scrolling energy news.
July 28th, 2010 at 10:13 amOff beat: http://www.examiner.com/examiner/x-10317-San-Diego-County-Political-Buzz-Examiner~y2010m7d24-Los-Zetas-drug-cartel-takes-control-2-US-ranches-in-Texas
July 28th, 2010 at 10:19 amNG up 18 cents but the gassy stocks are not paying attention.
July 28th, 2010 at 10:19 amZ: Do you have a dance card for any other Bakken boys that might follow in AEZ’s footsteps?
July 28th, 2010 at 10:20 amTom – I am long now WLL, BEXP, OAS, and KOG that are directly linked to the traditional Bakken play.
NFX and ROSE as well but those are more diversified stories.
Also SSN but that’s trading off Niobrara news more than it is Bakken.
So that’s the list for now and honestly, they aren’t getting any help from this deal at the moment.
Essentially pure plays will be KOG, NOG, BEXP (getting there) and OAS.
If you pull out the midcon from CLR, they start to look cheap on their nearly 900,000 acres in the Bakken but then again, they have not been drilling the big wells that others have.
July 28th, 2010 at 10:25 amRE: #37 HES, is on a P&F buy signal but is currently trading below trendline resistance, the P&F and traditional chart are both in a consolidation…at this point nothing that exciting, first resistance at $53-$54…HES is pressing topside daily traditional resistance now… charts added, nothing makes me want to jump in at the moment…
July 28th, 2010 at 10:28 amBP intraday…tracking the 50 period as support and the lower 30 min trendline from yesterday as resistance….
July 28th, 2010 at 10:31 am#70 — holy sh*t!! What an inconvenient truth (for some people), if it is true. Wow.
July 28th, 2010 at 10:32 amJB – thanks, my thoughts too. Done with AEZ, moving on.
July 28th, 2010 at 10:33 amCIGX 30 min intraday support at $1.83-$1.93…chart updated
July 28th, 2010 at 10:34 amDOE’s hitting again
July 28th, 2010 at 10:34 amHeard there was a file that was corrupt coming from the DOE, but never got confirmation
July 28th, 2010 at 10:35 amCrude still bouncing off the low, now 76.85.
Nifkin – it wouldn’t be the first time a file or something else was corrupt there.
July 28th, 2010 at 10:36 amMet with a company last week who has Bakken interests. They are not adding to their position there. Say it’s gotten way too competitive… all the acreage is tied up and M&A is the only way to get anything good.
This same company considers themselves to be very contrarian. They are currently thinking about buying/merging/partnering with a nat gas producer. They have spoken to HK about some properties… and they think the world of HK’s assets. When I told them i owed HK (at higher prices), they just smiled and said “you’ll be happy in the long run.”
In the long run, we are all dead. I hope to find happiness well before that.
Just musing….
July 28th, 2010 at 10:36 amCOP headlines coming across.
CEO says he wants to do more in the Gomex but won’t move until he knows what the rules are. Wow, a surprisingly simple statement that DC doesn’t understand on so many levels.
July 28th, 2010 at 10:38 amCrude at 77.20, off 30 cents on the day.
BOP – sounds like Jim Christmas won them over. Wonder if the KCS guys are still at HK.
July 28th, 2010 at 10:39 amJB — thank you! Voted.
July 28th, 2010 at 10:39 amKOG..looks like it’s winding up, currently a mini bull flag at the daily 100 day which intersects right at the topside daily trendline resistance zone, KOG looks like it wants to make another break higher….
July 28th, 2010 at 10:40 amRE: #85 BOP, thank you…
July 28th, 2010 at 10:41 amHe was singing the praises of Stoneburner.
Who wouldn’t like an energy CEO who goes by the name of “Dick Stoneburner.” That is just so darn appropriate.
(Takes me back to my old geology student days… the head of our dept was named “Dick Stone.” It was just so RIGHT.)
July 28th, 2010 at 10:43 amOAS – based on current market price is trading at $4,100 per Bakken acre.
July 28th, 2010 at 10:45 amNote to self… EXXI at $16.55 was just too cheap. Keep that in mind next time.
July 28th, 2010 at 10:46 amz — that same company (who thinks the world of Stoneburner) thinks that OAS’s acreage is concentrated in more of the marginal Bakken stuff. Any comments there, vs the AEZ acreage?
July 28th, 2010 at 10:47 amWhereas NOG is at $8,800 / ac and
July 28th, 2010 at 10:48 amKOG is at about $6,500
Stoneburner was a fraterity brother of mine at UT good name back then
July 28th, 2010 at 10:51 amThing is… there are still lots of private companies with Bakken acreage positions. Kinda surprised HES didn’t nosedive at some of those.
July 28th, 2010 at 10:52 amBOP – see page 2 here:
http://www.sec.gov/Archives/edgar/data/1486159/000095012310055381/h69816a5sv1za.htm
Sanish should be good as should be Nesson
On the west of Neeson segment, the blob to the east and middle is the south east corner of Rough Rider where BEXP has a couple of 3,000 BOEpd IPs. The stuff to the north in that area is north Rough Rider but I don’t think OAS has drilled it or at least not much.
So sort of hard to say as it’s early, but I would say they are shopping in the right neighborhoods.
July 28th, 2010 at 10:52 amGeno — it’s just such a “John Wayne” type of name. You can believe in a guy who goes by the name of Stoneburner. Hope he lives up to the moniker.
Were you in the geology dept at UT? Or engineering….
July 28th, 2010 at 10:55 amLand Management got out did not like being a landman got a geology degree
July 28th, 2010 at 10:56 amSSN refund update: Still nothing via Schwab.
July 28th, 2010 at 10:56 amGeno — good decision. 😉
July 28th, 2010 at 10:58 amre 98 sent a note to my Schwab contact, she sent on to an “analysis” group. Will see what they find. I think SSN sent checks on a slow boat floating along from Aussie land.
July 28th, 2010 at 11:00 amThanks Ski. I figure it will arrive when it arrives, but I like stay on top of that kind of thing.
July 28th, 2010 at 11:01 amAPC is nosediving
July 28th, 2010 at 11:02 amBill – where is Robry at for tomorrow? I’m sticking with 35 Bcf.
July 28th, 2010 at 11:05 amGoM kids not reacting well to the Congressional moves to restrict drilling. Land-based guys are up, for the most part.
Except for SD. It’s down because… well… it’s what SD does.
July 28th, 2010 at 11:06 amRe APC – yeah, sloppy market, not huge volume on the day by any means. No news out that I see. I had thought BP would press hard for them and Mitsui to pay. Comments on the BP call yesterday were along the lines of “we’ll see you in arbitration”
July 28th, 2010 at 11:07 amXEC getting whacked.
July 28th, 2010 at 11:13 amIf crude can hold here and start to move higher we maybe looking at a potential inverse h and s. Same with gold.
July 28th, 2010 at 11:14 amre 105: I am wondering when that arbitration may take place
July 28th, 2010 at 11:16 amSSN failing to get whacked today.
No idea re timing of arbitration. I would bet APC wants to put it off as long as the criminal probes are incomplete.
July 28th, 2010 at 11:18 amIt just gets better and better with this legislative body!
July 28th, 2010 at 11:23 amhttp://blogs.barrons.com/stockstowatchtoday/2010/07/28/sec-no-longer-obliged-to-respond-to-press-says-fox/?mod=yahoobarrons
For clarification-congress is the body I’m speaking of as they apparently passed the law.
July 28th, 2010 at 11:26 amNews note:VLO may restart Aruba refinery in Sep
July 28th, 2010 at 11:26 amAnyone have insight on WTI?
July 28th, 2010 at 11:30 amThanks Choices.
re 110. Nice.
July 28th, 2010 at 11:31 am>110
SEC no longer has to respond to public requests for information under new rules brought on by financial reform legislation.
wow
that and birth certificates
July 28th, 2010 at 11:36 am103 robry at 30 now
July 28th, 2010 at 11:37 amZ, Robry is 30, Bentek is 26, and Sempra is 32 for tomorrow
July 28th, 2010 at 11:38 amTRGL getting a nice lift. Perhaps off of Paris Basin partner HES. In any case this dog of chart has just resolved itself positively.
July 28th, 2010 at 11:39 amseems like everyone is getting whacked post earning.
given that, how does one play wll.
What are the odds of a beat?
July 28th, 2010 at 11:41 amWard of sd on cnbc in a moment, stock is at 5.97 down on the day at 12:43
July 28th, 2010 at 11:43 amCargo – re WTI – I am watching the earlier high at 77.20. If we can move above there fairly swifly then the inverse h and s is in play.
July 28th, 2010 at 11:44 am1,000+ WLL AUG $80 puts today
July 28th, 2010 at 11:44 amSSN: the missing message about having to book time for title search means that prices aren’t going any lower and that with the additional of the earnest money to hold the deal, you may expect the high end of the range.
July 28th, 2010 at 11:44 amCargo – nothing more than my previous comments. It sold off on the headline number which was inflated by an outlier of an imports number but demand by refineries remained strong and gasoline demand hit a new high for the year. So I thought crude would bounce of the lows and so far so good.
On phone back in a minute.
Eli – good longshot thought there.
July 28th, 2010 at 11:44 amWLL – I took deep in the money calls there the other day but that one is really a stock play for me and long term. I think they have a decent chance (call it 75%) of a CFPS beat tonight. I also think work at the Lewis and Clark area is more important than the numbers this quarter.
July 28th, 2010 at 11:46 amEli – true enough.
Going back and forth with president at SSN at the moment on some items.
So far I have:
1) Re post tax proceeds on the deal: Too difficult to compute given other sales they plan which could impact their rate. Checking to see if they will at least bless $50 mm plus post deal dollars,
2) the deal is breakable only with a significant level of title problems (which they have not encountered any yet) and not for other reasons. The president reiterated his belief the deal will close.
July 28th, 2010 at 11:49 amAnyone have a clue on why STR is down 4%? thought the quarter was ok and CC was good.
July 28th, 2010 at 11:50 am-ward- next yr 70 % oil
July 28th, 2010 at 11:55 am-still no 2010 ng hedges
-ward expect gom to decline 20 % to 30 %
1.7 to 2 bcf day
Commentary likes sd and oas
sd at 6.00 so 3 cent impact YEAHHHH
July 28th, 2010 at 11:56 amMHRprC: For those looking for a little yield, shareholders of this issue just approved going to 4mil shrs vs 750m. This is a 10.25% cum perp pfd trading right around par($25).
BUT YOU MAY NOT BUY IT TODAY. Recall that in June MHR and partner Hunt Oil spudded the first of two Eagle Fords so you are just in front of “an event”. If everything goes well with “the event”, issuance will find its way into the market, and perhaps price will go to a discount while the credit betters itself. Right now the issue is rated one notch below junk with a garbage rating. But one persons trash is……
July 28th, 2010 at 11:57 amOAS probably has about 6 brokers who all have initiated on the name with Buys in the last 48 hours pointing to the per acre price at AEZ and saying that OAS is too low.
July 28th, 2010 at 12:00 pm–and OAS was just pumped on cnbc seems to be the winner from the tom ward interview
July 28th, 2010 at 12:06 pmBill – re OAS . People should like the easy math there. It’s new, it has 290,000 net acres scattered across the Bakken and it trades for less than $5K per acre all the while sporting 100+% growth in 2010 and again in 2011 with $0 debt and a pile of cash.
July 28th, 2010 at 12:08 pmlol yahoo sd board assesment of interview
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_S/threadview?m=tm&bn=63136&tid=22826&mid=22826&tof=2&frt=2
133 i like the 0 debt
after thought
sd needs a token bahken position, lol
July 28th, 2010 at 12:09 pmBill – re yahoo board = LOL.
OAS about to tap new high.
July 28th, 2010 at 12:27 pmBob Dudley telling NPR he is hopeful they will kill the well Monday or Tuesday.
July 28th, 2010 at 12:39 pmAnyone know OAS’s current net Bakken production?
July 28th, 2010 at 12:41 pmAnyone have a good recent range on Woodford acreage?
July 28th, 2010 at 12:45 pmre 138: which player?
July 28th, 2010 at 12:46 pmBG39 – at the time of the IPO I had it pegged at 3,200 BOEpd
Reserves were 93% oil.
July 28th, 2010 at 12:47 pmre 139 – Oh, nobody in particular, just wonder what land is changing hands for in the core of the play.
July 28th, 2010 at 12:48 pmre 138:
ahh nvm, you meant $/ac
$350-$2000, largely dependent on where it’s located.
Shallower, less resource (western side) is $250-$700.
Deeper, more resource, higher pressure (700-10,000′ TVD, center & eastern edge) about $1,000-$2,500 tops.
July 28th, 2010 at 12:49 pmBG – thanks much, that’s what I needed.
July 28th, 2010 at 12:51 pmRanking players by $/ac worth in their WDFD portfolio without regard to size of position, top to bottom:
BP, XTO/XOM, NFX, PQ, DVN, Pablo, SM, CLR, Sedna, Cornerstone
July 28th, 2010 at 12:57 pmNFX, DVN only down the list due to their larger positions across the play, watering down the $/ac value
July 28th, 2010 at 12:59 pmBG – Did you ever get an understanding of what Aubrey didn’t like about the Woodford, or do you think he just needed the cash and one less gas play. It could be the midcon pricing structure but that would get better over time I would think, especially if we get transportation as a source of demand.
July 28th, 2010 at 1:00 pmThose sitting on the hottest WDFD acreage currently would be XTO, BP, PQ, NFX, and to some extend DVN. Most of this is in the Northeastern quadrant of the play.
July 28th, 2010 at 1:02 pmBeige Book out – says economic activity still increasing but 4 districts see softness.
July 28th, 2010 at 1:02 pmre 146: Aubrey got a great deal for his acreage at good gas prices (near the peak) as BP paid 1.75 B as I recall. Might have just seen a good deal and taken it.
It was some of the most productive acreage in the play, however, and BP stepped into a decent shoe on that one. We will see if they know how to wear it.
July 28th, 2010 at 1:05 pmAny thoughts if VNR can break above this $25 top?
July 28th, 2010 at 1:06 pmBG – thanks, I think he saw a deal and took it. At the time, he said something along the lines of its’ not as good as some people think it is.
July 28th, 2010 at 1:08 pmZTRADE – ZLT – OAS
Added a third bit of stock at an average $17.22 (brings my overall average to $15.92). This is essentially a swap with the AEZ sold earlier today.
July 28th, 2010 at 1:13 pmre 151: I think some people will end up being surprised by the finding costs reported in that eastern area by all the players. Guess it doesn’t matter if you’re trying to drop all gas for oil plays.
July 28th, 2010 at 1:14 pmBG – right, like well under $1/Mcfe F&D
July 28th, 2010 at 1:16 pmAnyone know how many rigs OAS is running in Bakken? not a lot on their page
July 28th, 2010 at 1:18 pmFYI OAS has options out
July 28th, 2010 at 1:27 pmCargo – I don’t have a lot on VNR at the moment, probably more a question for JB.
re 155
4 rigs, plan to drill 30 wells this year, no doubt more next:
http://seekingalpha.com/article/210760-oasis-in-the-bakken
July 28th, 2010 at 1:28 pmre 156. Well that was fast. Thanks.
July 28th, 2010 at 1:28 pmspreads are big, low volume, but promising
July 28th, 2010 at 1:30 pmFeb 2011 OAS 17.5’s for $2.50, is that a mistake??
July 28th, 2010 at 1:35 pmre 160. He looks real for 23 contracts.
July 28th, 2010 at 1:40 pmLINE back to $30 after yesterday’s puntfest.
July 28th, 2010 at 1:40 pmGot an email asking if my chat with SSN is going to prompt me to buy more. Answer to that is not yet but it eases my finger off the trigger on the remaining. I have another set of ?s in with the company now.
July 28th, 2010 at 1:41 pmI am hoping we see a late day rally or a rally tomorrow otherwise the bullish count is on thin ice. We cannot break 1089 and as the down cycle is in effect until 2/3rd August that does not give us much room.
July 28th, 2010 at 1:51 pmThanks Nicky, stepping out for a bit.
July 28th, 2010 at 1:53 pmNicky — interesting that your Aug 2/3rd corresponds to HeadTrader’s thoughts that we may see money put to work in equities at the beginning of the month. Assuming we don’t fall off a cliff into the close of July.
July 28th, 2010 at 1:56 pmBOP thinking if we could see a move up to 1126 into late tomorrow that gives us room to move back into the 1090’s into early next week without violating any key levels. But if we end today at 1100 that is unlikely.
July 28th, 2010 at 1:58 pmSo today’s close will be crucial. Stay abovt 1100 and on track. Close below and watch out below……
July 28th, 2010 at 2:02 pmI got the feeling talking to VNR they would be emphasizing on upcoming conf. call that 1. most of restatements were non-cash and 2. the increase in cash flow as the acq. tilts production toward oil. My guess is it will play well but be boring vs. LINE’s G. Wash discussion and resulting cash flow.
July 28th, 2010 at 2:03 pmOne question I ponder: as LINE becomes more E&P-like and less MLP-like, and E&P’s valuation is a discount to MLPs, does LINE’s decline as their production and reserves spike up with the big IPs?
RMD — it’s a yield thing, i would think. As long as LINE can maintain a yield above 7% (just to pick a baseline number), it will be valued as an MLP, not an E&P, i would think.
July 28th, 2010 at 2:18 pmOn the other hand, the more “risk” LINE reaches for, to keep the payout up, the higher the payout % will need to be. Sort of a balancing act.
July 28th, 2010 at 2:19 pmInteresting:
http://www.examiner.com/x-17371-Raleigh-Climate-Examiner~y2010m7d27-African-wave-train-could-be-trouble-in-23-weeks
July 28th, 2010 at 2:23 pmAfter the close we have “a bunch” of earnings reports:
http://zmansenergybrain.com/subscriber-data/calendar/
July 28th, 2010 at 2:26 pmBP testing relief well BOP, circulating fluids to clean the well.
July 28th, 2010 at 2:32 pm170: I was alluding to the valuation of MLPs being 2X E&Ps on an EV/mmcfe or EV/mcf/day of production. Also sell at premiums to cash flow.
July 28th, 2010 at 2:46 pmRe #35 HES may be OK w/$1B liability cap in GOM but there are a lot of independent operators smaller than they who WILL NOT be so sanguine. Most can not afford $1B in liability coverage. We pay nearly $1 million/yr for $30 million insurance coverage today.
Rep. Rahall’s amendment to HR 3543 is filled w/all sorts of nasty surprises including, but not limited to(i hate that phrase), a $2/bbl and $0.20/mcf “Conservation Fee” from production from ALL federal leases on and offshore(sounds like a disincentive to produce to me), royalty redetermination on existing federal leases that currently have reduced royalty as incentives to drill in deep wtr or >15,000′, called the “Royalty Relief for American Consumers Act of 2010”
We GOM independent operators are quaking in our boots!!
July 28th, 2010 at 2:47 pmI don’t see them passing that conservation fee. I wonder if those guys realize just how much 20 cents an M is to many, many plays. That’s a huge %. Gee, I wonder if that would be passed along to the consumer. And the redetermination is completely bogus unless you are willing to buy the leases back plus interest which I am sure the U.S. is not.
Same goes for any proposed non-use rental fee. The royalty relief concept was put in place on the first XXX barrels depending on the play to get people to risk capital on ventures that simply would not otherwise be economic, especially in non-satellite situations. These guys must like foreign oil. All I can say is pal, you better pass that before November because after that you have no chance.
July 28th, 2010 at 2:54 pmAnd I hear ya on the Liability Cap, was just passing it along. Of course they support a higher one as a lot of competition for leases comes from small E&Ps who have a piece of seismic they like and going all in on their bids. Those cats won’t be able to pay the insurance premiums and still make the big bids.
July 28th, 2010 at 2:55 pmBeerthirty
Nicky and BOP, large and in charge tomorrow. I will post a Thursday post late, late tonight.
July 28th, 2010 at 2:58 pmi capitulated and sold gmxr and put the money into wll calls
Fingers crossed….
HK and Sd next which means we are close to a bottom
I think wll will do 65.0 mboe and prices should be ok.Cash flow neutral after cap ex
July 28th, 2010 at 3:10 pmZ – enjoy your break. Try not to worry too much with the girls in charge!
July 28th, 2010 at 3:14 pmWhat, me worry?
More replies from SSN:
If I understand Australian it seems that they will keep 100% of the sale proceeds (I had asked about the ability to shield from gains taxes).
They’ll also be looking to add more Bakken acres (could be some news on this in the next couple of weeks), and will be drilling their first Niobrara wells in 1Q11, probably carried for the first two. The wells will 5,000′ horizontals, not the post holes I had feared.
I think I will hold on to what I’ve got left for awhile now.
July 28th, 2010 at 3:22 pmWLT on the tape, $2.16 vs $1.93 est
July 28th, 2010 at 3:34 pmRMD — #175 do those multiples hold over time?
No argument from me… but I think MLP’s are valued almost purely on relative-value payout (and expectation of future payouts). Like a dividend discount valuation model. The yield is related to corporate bond yields. And the payout is a function of the company’s leverage and earnings (of course).
Anyway, that is the way we used to look at MLPs in the past. It’s a yield vs cost of capital vs earnings expectations thing. JMO, of course!
July 28th, 2010 at 3:40 pmZ – have a good trip. much deserved.
July 28th, 2010 at 4:00 pmWLL – production just over the high end of the range, EPS of 1.31 vs 1.23 est…. still reading.
Thanks 1520, can’t manage to get out the door just yet.
July 28th, 2010 at 4:22 pmWLL guidance hiked from 11 to 13% over 2009 to 15 to 17% over 2009.
Budget remained flat at $830 mm.
July 28th, 2010 at 4:29 pmWLL – three wells awaiting completion in L&C so no real news there.
But they have leased 39,000 net acres in the Niobrara which should be news to everyone.
July 28th, 2010 at 4:41 pmRam Energy trimming production guidance.
July 28th, 2010 at 6:03 pm$NYMO back to 45.90, burning off quite a bit of the over sold condition. move higher is next….
July 28th, 2010 at 6:50 pmZman have a relaxing break….
#190, that is I meant to say "overbought"…ie the McClellan is not nearly as overbought now…
July 28th, 2010 at 6:52 pmShould have said 39,000 more net acres.
Thanks JB, good to hear.
July 28th, 2010 at 6:55 pmZ great buy on AEZ.
July 28th, 2010 at 7:19 pmBOP #82 is so funny it hurts. Must be time to buy more HK when Nickys pullback happens.
"Thank you sir may I have another" comes to mind with HK.
Thanks Mim- had planned to be in that one a lot longer.
July 28th, 2010 at 8:12 pmAAA – thanks, got that
July 28th, 2010 at 8:56 pmPati – CHK midstream IPO went at the top of the range.
Also noted that APA's secondary to help pay for the BP assets was up-sized,
July 28th, 2010 at 8:58 pm