Tuesday – All Beached Out

Posted on by zman

I'll be back in the office mid day Wednesday, until then, another bullet post

  • Commodity Watch:
    • Oil ended up 3% at $81.34 on the back of a surging equity market and now looks like this.
      • Early Read on Inventories Watch:
        • Crude - DOWN 1.5 mm barrels
        • Gasoline - DOWN 1.0 mm barrels
        • Distillates - UP 1.0 mm barrels
    • Natural gas was not so hot, falling 4.5% to $4.70, even as Tropical Low #4, now Colin, sprang into being over the Atlantic. Tracks are headed to the East Coast.  Another potential storm is brewing north of Venezuela.
  • BP Spill Watch:
    • The rig to be used for the static kill today sprang a couple of leaks yesterday causing a slight delay in the operation. The Coast Guard now says the procedure will require 1.5 to 3 days to complete.
    • BP is under investigation by the SEC for possible insider trading and failure to disclosure the risks associate with deepwater drilling. Maybe so on the former and if so they deserve what they get. On the latter, give me a break.
    • D.C. says Macondo spewed 4.9 mm barrels of oil into the Gulf. That puts the EPA fee at a minimum of $4 billion to as much as $16B  if negligence is proven which is almost a certainty.
  • Earnings Briefs:
    • FST -OK
      • The 2Q Numbers:
        • Production of 464 MMcfepd, just above  guidance
        • EPS of $0.42 vs $0.41 expected  (Reuters called consensus higher at $0.45 but CFPS should matter more)
        • CFPS of $1.62 vs $1.27 expected
      • Highlights:
        • 2010 guidance boosted
        • Added acreage in the Tx Panhandle portion of the Granite Wash plays and continued to drill high rate wells there.
        • No play by me for now.
    • HK - Miss
      • The 2Q Numbers:
        • Production of 625 MMcfepd vs guidance of 610 to 620 MMcfepd (pretty standard for them to beat volume guidance)
        • LOE was an incredibly low $0.29 / Mcfe
        • EPS of $0.09 vs $0.11 expected
        • CFPS of $0.54 vs $0.65 expected (not great, hard to figure how they keeping coming up short on the bottom line)
      • Highlights:
        • Hedges got a boost:
          • 2011: now 68% at $5.50 (considerably higher than their peers)
          • 2012: now 23% with floors at $5
        • Operational highlights mostly dealt with efficiency, not a lot of big IPs to talk about, just better drill times with lower costs.
        • Nothing new and no forward commentary on the deal front. I think they should monetize their Fayetteville shale position and there have been some rumors but so far nothing out of the company.
      • Nutshell: They need to stop missing or guide better. I continue to own the common but am not inclined to trade the options at the present time. The name is on the cheap side for itself but may get cheaper if analysts lose confidence in their estimates.  Conference Cal: 11:30 am EST.
    • CHK - Bill summed this up pretty well in comments yesterday.
  • Other Stuff:
  • HERO reports a slight beat, says permit delays offshore hurting business, same as BHI.
  • BEXP announce after the close

171 thoughts on “Tuesday – All Beached Out”

  1. HK tidbit from Dahlman Rose this am:

    The company’s innovative well designs in the Haynesville, if successful, could have industry-wide cost reduction implications. Necessity is the mother of invention, as the company works on designs that could have industry-wide implications. Petrohawk seeks to modify its wells to allow fracking with significantly lower pressures at the surface. If succesful, the company estimates that this technique could save $1MM/well in the Haynesville. Innovation is Petrohawk at its best,

  2. Market Snapshot at 7:45 am

    Morning Levels:

    · SP500 futures are flattish this morning at 1120

    · Europe – off small; DJ Euro Stoxx flattish; FTSE/CAC off ~15bp; DAX and Spain up 20bp. Top gainers in Europe – Nokia, CRH, Telecom Italia, Daimler, Aegon, BNP, Arcelor; weakest: SocGen, Vivendi, Philips, Air Liquide, Telefonica. In London, Standard Chartered +1.9%, Prudential +1.9%, Centrica +1.8%. Investec -5% (share placing), Arm Holdings -5%.

    · Treasuries – rallying this morning on WSJ Fed QE article (see below). 2yr yields now 0.53% (new lows again for yields). 10yr yields 2.91% (off 5bp overnight); 30yr yields 4.03% (off 3bp overnight). Also – late in trading on Mon (3pmET), the TSY lowered its Jul-Sept borrowing est (Borrowing will total a net $350 billion in the current quarter, compared with an estimate three months ago of $376 billion). The TSY’s Qtrly Refunding conf @ 10amET today.

    · FX – dollar off 0.5% (has been in the red for last 5 consecutive sessions); DXY falling under its 200day MA today (first time since Jan). Dollar hit on the Fed QE article in WSJ. Euro up 0.5% today (people talking about 1.35 as next big level) and pound up 0.5% (GBP has been up for last 9 consecutive sessions; people saying 1.60 next big level).

    · Asia: Japan +1.3%; China dn 1.7%; Hong Kong +0.2%; India +0.2%; Australia +0.6%

    · European sov CDS – Greece is 22bp tighter (to 737bp); Spain and Portugal are flattish. Greece benefiting from reports EU/IMF will sign off on more bailout cash.

    · European bank CDS – tighter – Lloyds -11bp, SocGen -8bp, Unicredit -7bp, Commerzbank -5.5bp, DB -5.3bp, Santander -5bp.

    · Commodities – copper off ~1% this morning (after climbing for last 4 days); crude is up again this morning (up 0.6% to $81.85). Gold up small (0.2%); has been up for last 5 sessions. 1190 for gold (which is its 20dayMA) next level to watch.

  3. Today’s Top Stories

    · Equities mixed overnight with Asia (ex-China) trading up for the most part on back of the strength in the US yesterday while Europe gives back some of yesterday’s nearly 3% gain (although Europe trading back to flattish as 7am rolls around). A few headlines on the Int’l landscape inc. – Greece set to receive the second piece of stimulus funds this week, the Reserve Bank of Australia Board decided to leave the cash rate steady at 4.5% for the third straight month (inline w/expectations) and Thailand’s SET index became the second Asian benchmark index to enter a bull market.

    · China equities lagged w/Financials weighing (closed off 1.8%) in part due to capital raising worries (i.e. GF Securities, China Construction Bank, etc.).

    · All eyes on a few important upcoming catalyst for the market inc. July Auto Sales in the US (will hit throughout the day), the China Services PMI (hits tonight at 10:30pmET), Thursday’s ECB & BoE Meetings and the Jobs # on Friday.

    · Fed considering making “symbolic” shift in bond portfolio at next week’s (Aug 8) FOMC meeting; Fed officials expected to discuss reinvesting proceeds from maturing bonds into Treasuries (as of right now, the Fed is allowing maturing debt to run off and its portfolio to gradually shrink) – WSJ

    · While Fed considers more QE, the ECB continues to wind down its purchases – The ECB said it settled €81 million ($105.6 million) in transactions under its Securities Markets Program, down from €176 million the previous week. In the initial weeks of the program, the ECB bought EU26.5B. WSJ

    · Geithner oped in the NYT – “Welcome to the recovery” – “a review of recent data on the American economy shows that we are on a path back to growth” “Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter” NYT

    · For profit education – new report due out Wed from the GAO – the report will find that recruiters at for-profit colleges lied to entice students and encouraged them to commit fraud to qualify for aid. The Senate HELP Committee will hold a hearing on the report on Wed – Bloomberg

    · Auto sales – J. D. Power Cuts July Auto Sales Forecast to ‘just under 12M’ vs. prev. 12.2M – says “sharp improvement” in auto sales “slowed during the final 2wks of the month”; Says sales softening indicates some vulnerability in the market, likely brought on by the lack of escalating incenting levels (DJ)

    · SP500 technicals (Krauss) – Testing 1131 June high on strong breadth. Above seeks 1140-1152. Could prove tough to eclipse in August. Watch divergences, and Thur’s AAII Bulls reading. Short term support rests at 1114 200 day MA, and Mon’s 1106-1108 bull gap.

  4. Last Night’s BedTime Market Strategist —

    Horse Race

    Last night when we mentioned Minsky’s “heroism” of the consumer, we conceded that few would have the imagination to believe in such a concept in the current environment. Little did we suspect the next person to weigh in would be the Fed Chairman himself. “While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions.” Maybe it is not exactly heroism talk, but Bernanke’s optimistic outlook and his focus on consumer spending is noteworthy, particularly considering that it was only last week when the St. Louis Fed President warned that Fed policy may be taking the U.S. on a path to Japanese deflation. These divergent views will make next week’s FOMC meeting very interesting. If you wanted to translate these views into tick by tick market action, Bernanke would be represented by the Continuous Commodity Index, which hit a new recovery high today. Bullard would be represented by the 10 year Treasury yield, which remains anchored below 3% despite the market rally over the past month and the better than expected ISM today.

    Greenspan Put

    Alan Greenspan’s interview on “Meet the Press” received a fair degree of media attention. The segment was about the recovery feeling like a recession. In light of the context of the dialogue, it is easy to identify negative headlines. The end of the interview was what caught our attention. Host David Gregory asked the former Fed Chairman if the Dow Industrials would be able to sustain 10,400. Greenspan’s response was, ” I wish I could answer that one. It’s a critical issue because, as you point out and as I’ve always believed, we underestimate the impact of stock prices on economic activity. Asset prices are having a profoundly important effect. What created the extent of the contraction globally was the loss of $37 trillion in market value. It collapsed the value of collateral in the system and it disabled finance. We’ve come all the way back, maybe more than halfway, and it’s had a very positive effect. I don’t know where the stock market is going, but I will say this, that if it continues hotter, this will do more to stimulate the economy than anything we’ve been talking about today or anything anybody else was talking about.” That line was spoken like a true Central Banker who oversaw multiple asset bubbles during his tenure. It sounds as if the “Greenspan Put” was the bedrock of his monetary policy approach.

    It is not new that Greenspan believes a recovery in the stock market and equity values will help to de-lever the economy. He has been making that point for over a year. What was eye-catching is that he said he “always believed” we underestimate the impact of stock prices on economic activity and that higher stock prices will do more for the current recovery than anything else. Remarkably, during his tenure, he continually argued there was no way to prevent asset bubbles, and all a Central bank could do is clean up the aftermath. Well, where is his mop?

  5. HK doing a little balance sheet management this morning. Tendering for $768mm of 9.125% Notes due 2013 at 104.813 + 1 pt tender fee. In return, HK is offering $825mm of 8 yr Senior Notes. The 9.125s are currently trading around 105… so people have to be sorry to see these puppies retired a coupla yrs early.

  6. Hk looks like it will open 5 % lower

    TPH says they beat, headlines says they missed

    As older hedges roll off, realized prices for ng will be lower for HK and others

  7. Bill – they beat on the topline volumes but missed on the bottom line despite lower operating costs and good hedges. Second quarter they haven’t brought good unit volume growth to the bottom line to the extent the analyst crowd thought they would. Haven’t torn it apart yet but its definitely a miss.

  8. HK — don’t see how one could characterize HK’s result as a “beat.” Guess they “beat” TPH’s internal number… but capex is going up… mrkt not treating those statements well these days.

  9. Aloha

    This is almost civilized to be operating on the central time zone.

    Baltic keeps going up a little every day. TED spread continues to narrow.

    There really is no love for commodity stocks (the ones I own) these days. Except for FCX and POT.

  11. tph> 11c Q2 EPS (TPH 9c, Street 11c), beat on +2% production, lower LOE, production taxes, interest.

    Headline says 9 cents so im quibling over 2 cents and that 2 cents will cost hk 75 cents, (5 %) on the opening after being down 25 % in the last 3 month’s

    AAARGH

  12. Statement by little RAME as to why production guidance is headed south. ‘Fraid we are going to hear more and more of this from the Little Guys…
    ————————-

    The company claimed the decrease in production was due to a shortage of fracturing and stimulation crews and equipment delaying previously estimated South Texas completions, combined with natural production declines and weather related disruptions.

  15. Credit Market a bit reddish this morning… with the exception of TED.

    IG 1/4 basis point wider (so, basically flat)

    HY 3 bps wider, down 3/32 point (so also, basically, flat)

    TED +29.5 bps… still drifting back down toward +25 bps Safety Zone. Go TED!

  16. jat — thanks. I think we will hear much of the same verbage when little KOG reports at the end of this week. Fact of life… not enough frac crews out there to keep up with drilling rigs. For now, anyway.

  17. HK — looks like Dahlman Rose was unimpressed. Even with a $15-handle, they have HK rated a “hold.”

  18. MMR indicating net pay from the Blueberry Hill #9 STK1 well is 105 net feet (PXP WI 48%)

  20. jat — thanks for that head’s up on MMR. It’s one of the few Strong Greenies in an otherwise nyett-mrkt.

  21. That said, mrkt trying to green-up as we speak. z, your OAS continues to soar!

  22. I just put more $$$$ in HK…the more of it I buy the more I feel sorry for myself…I just love wallowing in self pit I guess.

  23. you’re not alone, jivey…. HK bounced off it’s 15.50 low pretty quickly. The quarter wasn’t “bad” per se… just not something to smile about.

  24. In the “It Could Be Worse” category… BHI down 11%, the most in the SPX. Ouch.

  25. Interesting note this morning from Charlotte Parks

    The Treasury market is opening very strong this morning. Part of the strength is coming from a WSJ article suggesting that the FED may begin to invest cash flows from its MBS holdings. Also, St. Louis Fed’s Bullard has spoken several times over the last week expressing concern about the possibility of deflation in the US economy and the potential for further quantitative easing from the FED. Even 2-yr notes hit another new high last night at .5301%. One primary dealer opined with the FED on hold for the better part of the next year or more, 2-yr notes could go to .40%. Japanese lifers and pension companies did more extention trades in the overnight session, buying 10-yr Treasuries. 10-yr notes gained 13 ticks to 104-31 (2.91%), not far from the recent low print of 2.88%. It makes sense that Pimco may have bought a big chunk of last week’s 5-yr auction, as was rumored, since the fund manager is on record stating that he prefers the intermediate part of the curve. According to the WSJ, several large funds are positioning for the possibility of deflation by investing in more bonds. Good luck today.

  26. HeadTrader saying there is just no volume behind today’s market move. He also said that he thinks the mrkt should not have been up as strongly as it was y’day. So, today is just a little give-back of y’days irrational exhuberance. I’ll go with that. Makes sense to me.

  27. bondbuddah — thank you for your T-mrkt comments. Please feel free to post stuff you find useful. We do too.

  28. re: 23…I thought it was a pretty good quarter operationally; they are just in the dog house and not doing themselves any favors while “doing the time”

  29. jivey — according to industry insiders, “someday we will be very happy we own HK.”

    I just hope to live that long.

  30. In the FWIW category… buy on red days, sell on green.

    ECO data pushing us further into the Red Zone. Pending Home Sales weak (who thought they would be stong again??) and factory orders down a bit more than expected.

  31. RE 25 – Let’s pump up the biggest bubble in history a little more… this will not end well.

    Anyone who thinks there is any sort of an end to QE in the near future is crazy. The ECB and the Fed are just playing nice and taking turns.

  32. One eco- and market-sensitive stock I watch… RSO (thank you, wcoaster). Commercial real estate REIT. Just reported a nice quarter, so trading green today. This is a good “canary in a coal mine” stock… for me, anyway.

  33. CIGX 30 min chart updated…trading at the lower ascending triangle trendline, $2.05…

  34. VTZ #31 — the Internet Craze “monetized” everyone’s 401K in the late 90s/early 2000’s. The Housing-As-ATMs monetized consumer real estate in 2002-2008. The US Taxpayer is the LAST Asset this country has to “monetize” before selling off chunks of the Family Jewels. And I sure don’t see us monetizing that tax base any smarter than we monetized the last two assets in our control. Unless the trajectory changes, this is not going to end well, agreed.

  37. jivey — you buy that new car yet? HK looking good. SHHHHHHHHHHHHh…….

  40. re: 37…nope on the car…but am flying to delmar on Thurs. to see some old friends, tell some lies and dream of hitting a big Pick 6

  42. WRES…breaking out above a multi month base, anything fundamental happening with WRES?

  43. cargo — KOG is still ramping up production and drilling… so, in terms of “what do I expect earnings and production to be,” I don’t have any yet. KOG is still an exercise in NAV calculations… at some point, they will flop over into an earnings/production model. But not there yet. Will be listening for 1) results from TFS wells drilled by others near KOG’s Reservation Holdings, 2) any comments about the quality of the Bakken on KOG’s non-Rez acreage, 3) timing of TFS well, 4) impact of frac-crew shortage, 5) more on the Red River wells, 6) timing of tying into an oil and nat gas pipeline for production on the Rez, and 7) anything at all from the DVN JV.

  45. Vaalco Energy. (EGY) provided an unexpected update this AM on sidetrack #2 of the recently drilled South East Etame (shallow offshorre Gabon) exploration well…..90′ oil column.

    IMHO this will will declared commercial, and add significantly to their reserves!!!!

    Drill rig (Vantage Sapphire Driller) has been moved and has 4 more wells to drill for Vaalco (3 slam dunk development wells) and 1 more exploration well…..all in succession.

    very good news!

  46. crys — thank you! missed the EGY news. 90′ of oil column is more than I thought… did they give any est as to how many reserves this added?

  48. Frac waits. Met with GST management last week. Waiting sixty days to spud #7H Wildman ( EF) because Frac date is 180 days out!!

  49. No reserve estimates provided, but back of envelope calc,s based on earlier PR release and data today yield a SWAG of >4mm B/O

    Above IMHO

  50. crys — most wells in that area do about 4k b/d gross, as I recall. Going back to EGY’s presentation earlier this yr, they thought SE Etame could add as much as 27mm of gross reserves. But this included reserves from both the Gamba and Dentale.

    Thanks again for keeping on top of this micro-mini with a Stash of Cash.

  51. EGY — hmmmm… no comments on the status of their partner search for their onshore Gabon concession… nor anything about Angola.

    Still, SE Etame sound economic. “90 ft full to base” is the kind of stuff you love to hear companies say.

  53. HK — seems to help if Howard Weil removes you from their “Focus List.”

    Wow. Nice rebound off the low.

  54. BOP- thanks for the KOG info. Its been good to me so far so I think I will stick around for more.

    Funny about my psychology though, I get weird at the extremes in both directions.

  56. BOP- I do not read that as full to base, only 90′ of column to water contact. First well is a 16′ sand full near crest, side track #2 finds o/w contact indicating a 90′ oil column. In these low relief structures that might be substantial area and volume, but a 16′ sand is pretty skinny.

  57. reef — whoa. Good catch. My mind’s eye put in something that is not there. EGY actually said “based on oil/water contact.”

    Watching a few too many things at the same time, this morning, i guess. Thanks for the help.

  58. reef — GST reports after mrkt close on Thurs. I get the sense that 2Q will be no great shakes (as they had some production down). Do you think they will be able to (or want to) say anything about the EF and GlenRose potential in E TX? Or, more of “we ain’t sayin’ nothing!”

  62. GST — so, left with a pftttt-2Q and no glints or shimmers of shiny things to come in the future.

    Could be a buying opp. What do you think?

  63. Thanks for the comments guys doing a little reading on the way back. Adding egy to the get to sooner than later list

    OAS at 18. Should soon see 2q

  66. HK = don’t think of them as Fayetteville anymore, EF and Hayneville-focused now. Also, looking to grow liquids.

  73. BG — if you drill a well, but can’t complete it (due to frac crew delays), can you still file for HBP status?

  74. Generally, to hold the lease (in OK anyway), you need “Continuous operations”, i.e. some guy out moving dirt around. That works temporarily, but eventually, you need the production to hold the lease.

  76. RE 73 It would come under continuous operations if you have a lease expiring until you actually produce it.

  77. thanks, BG. Frac crew tightness is just part of what companies have to “budget” into their drilling schedules these days. But, 180 days = an awfully long wait… especially for those companies trying to move expiring acreage into HBP status.

    Probably doesn’t affect much… just thinking out loud.

  78. 73- my view is that you are completing, and a letter(s) from completion companies that you are on the schedule waiting on equipment should duffice. In doubt however, one could perforate and test a minimal amount of gas and claim it a “shut in” gas well and pay “shut in” payments.

  83. OK… HK just said it… frac delays don’t have any affect on “lease capture schedule.”

  84. re 78 – Reef, agreed, either perf and “test”, keep moving dirt around, or actually complete, any would work to hold a lease usually.

  85. jivey — you are on track to get a Gold Star for Trading today on that HK buy. Conf call going well.

  86. re 77, really makes you wonder how some of the recent stub EF players are going to get any meaningful program off the ground anytime soon.

  88. jat — yep. Like GST…

    ram — yes. All else equal, LINE would be down 63c tomorrow.

  89. Ford just reported July vehicle sales… down 0.7%. Analysts were predicting UP 10%.

  90. re 86 – if they are anything like NFX, they are sharing frac crews between plays. Certainly bullish for the service sector down there.

  92. What analysts sincerely believes, that with this sputtering economy, that there is going to be an increase in big ticket items? Even if you have a job, the key is to conserve what you have because the job might be gone in the future. There is a big disconnect between analysts who predict numbers and reality.

  93. F Total Unadjusted Sales were up 3.1%.
    Adjusted Sales were down 0.7%.

    Overall, July industry sales up 3-4%

  94. Like the Jobs Numbers, vehicle sales are subject to a “seasonal adjustment.”

    So, pick the number you like the most. (But the number that is usually accepted as the “actual” number is not the actual number, but the seasonally-adjusted one. Go figure.)

  95. Sorry to have missed the nice day-trade/swing trade in HK. So, just downed my 2nd CigRx tablet of the morning. Feeling a lot better now… hmmmmmmmmmmmmmmmmmmmmm……………

  96. Re LINE. Theoretically the dividend is already priced into the option valuation. Real world experience shows that that usually holds. But, I plan to have lunch at a wifi hotspot where I can hook up the l can hook up the trading platform and fire off at least two trades.

  97. re: 85…well I just added in the same amt. more…took on additonal 10%bigger size today…maybe this is a one day change of sentiment or maybe its the turn…either way I’ve been following this a long time and am going to stick it out..

  100. ram — just a few handed out to a few FSS’s (Friends of Star Scientific). One was nice enough to pass along a few.

    They are minty fresh!

  101. Blatant overuse of the word “few” there… oops.

    But, no. Not in formal distribution yet. Approved. But not distributed. Still waiting on inVentive’s launch schedule. And no one is spilling the beans on exactly when that is.

  102. How do you envision the distribution and the type of stocking? Is it going to be like nicorettes or less dramatic?

  103. No problem Ram, just commenting when I see a cell tower. ATT = crappy coverage

    Oil should probably not be this high now.

  107. andy and ram — i have heard that one pack of CigRx will be priced about the same as one pack of cigarettes, with about 30 tablets/pack. But I don’t know what the final product pricing and placement will be. Different channels, different pricing, I would think.

    inVentive is whispering that they think CigRx will be their largest product distribution by 2012. But, all this is just speculation, at this point.

  108. Musing… wouldn’t it be nice if you could prevent Alzheimers and have minty-fresh-breath at the same time???

  109. Hk. Pxd Eog. Chk. So far not much problems getting fracs done in efs. Smaller players, like Eli’s hypey MHR may have more trouble.

    KOG should have 3 wells tonight

    BExp should have their most important well of the year tonight. In Montana.

  111. BOP: Notes from HK CC: 1. They continue to use “capital spending discipline” 2. Their reservoir optimization program they are very proud of. Lower costs with higher EUR. 3. The HBP constraints in the HS should be behind them by mid-year ’11. The smaller chokes are reducing 1st year decline rates. 4. Expect the Fayetteville to be a sale. They do not want a JV. 5. Cost per well in EFS 6 -6.5M. HS 9.5 – 10M. 6. Expect oil to be 5% of production by year end. 7. There were some legal fees that made the quarter seem like more of a miss than it was. I have no clue what to expect from this stock price wise going forward. After reading PR last night, I would not have expected a $1/sh rally.

  112. z — KOG tonight? I think Q released Thurs after close and conf call Friday morning…

  113. Tom — good HK summary. Thank you.

    And I’m having a One Dollar Surprise right along side ya.

  114. re 109 – the people having trouble getting fracs done are probably the players in the dry gas shales 🙁

  115. Friday morning we also get the NonFarm Payroll report too. Economists are looking for a headline loss of 60,000 jobs in July. However, looks like those will be the govt Census Jobs, as Private Payrolls are expected to be up 90k with Manufacturing up 10k.

    If we get those numbers, I think we rally. If not, Red Day.

  116. Bg39. Saw email. Will get to it tonight

    Bop. Thanks for notes. Did they officially take hs eur est ip? Do they put new hs wells at 7mm cost now?

    Did they say FS is for sale? Data room ? Ha, see comment in post

  117. BOP: HK did not get any “atta boy good quarter” from the analysts. Expect comments to be somewhat muted. Was nice to see Gil Yang is now with BAC-Merrill. Is a favorite reverse indicator of mine. Will have to see what he writes.

  118. Those 9.125% notes that HK is calling and replacing with new notes… price talk is around 7.25% for the new ones.

  119. re 169 – No hurry Z

    Anyone thinking of picking up more KOG common before their call?

  122. Z: 116 HK took their EUR’s up but did not give a number. They are suggesting HS and EFS costs per well are declining but right now 9.5 – 10m in HS.

  123. BG — curious what you think there. Historically, KOG seems to disappoint with their actual results. I’ve bought shares on that disappointment, but haven’t bought ahead of earnings. That said, maybe this time is different. I just worry about what they are going to say about frac crew delays.

  124. Tom — shoehorning my jaw off the floor over HK stock reaction. That said, I own it… a lot higher than there. So, overall happy at the move.

  125. Z: 116 In the FS Floyd said he does not want a joint venture but did not directly say he will sell all. If you have no JV what else can they do?

  126. MIDDAY OVERVIEW
    • Market Update – stocks dwn ~3pts as of 12 noon, well off the lows of the morning; equities hurt by some weaker US eco #s (spending/income + auto sales) and a bunch of disappointing earnings releases (esp. DOW, PG, and BHI). Volumes are a bit higher on this pullback than they were on yesterday’s rally, but the selling isn’t too aggressive. Def. more an interest to take exposure off the table and people are booking some profits, but shorts not too aggressive and dips in certain situations bringing out buyers. Market actually demonstrating some resiliency given some steep declines coming away from earnings in important sectors (like DOW -9%, PG -4%, BHI -13%, COH -4.5%). Technically, the next major level isn’t until 1114 on cash (which is the 200day MA). Earnings season continues to wind down – the last major systemically important reports will be the European banks in the coming days. Central banks are increasingly in focus – the ECB is coming this Thurs morning and next Tues we get the FOMC and BOJ.
    • Equity sectors – Materials are the worst space in the market, falling over 1.25% on weakness in chemicals following DOW’s earnings miss. The group is finding decent support, however, thanks to strength in steel stocks on reports China’s mills are cutting capacity. Discretionary is off 1.2% and lagging on MA’s cautious comments on consumer spending and also on weak 3Q guidance from OMX and ODP on earnings. Financials are off over 0.6% on weakness in PFG of earnings and SLM following a report from the GAO that for-profit recruiters encouraged students to commit fraud to obtain student loans. Staples are off 0.6% and lagging on earnings out of PG and DF. Industrials are slightly below the tape on weakness in homebuilders (DHI earnings), building products (VMC and MLM earnings), and the Class 8 truck orders (NAV, PCAR, and CMI). Tech is also slightly below the tape on weakness in semis (SOX off >1%). Telecom is flattish, outperforming thanks to strength in T, although PCS and S weigh on the group. Utilities are up slightly on a bit of a defensive bid and also on earnings out of SRE and GAS. Energy is up just under 0.5% on strength in E&Ps (HK and WTI earnings) and coals thanks to a small jump in natural gas. Also helping the energy space is a rally in solars off ESLR’s earnings last night. Healthcare is up around 1% and is the top space in the market thanks to a nice earnings beat out of PFE. Within the group pharma and managed care are outperforming.
    • Best performing sp500 stocks: CTSH, DVA, PFE, VRSN, AKS, VLO, UNH, AKAM, WLP, NWL
    • Weakest performing: BHI, DOW, DF, JCP, DHI, PHM, SPLS, PG, PFG
    • Commodities: Commodities are mixed; Crude Oil and Copper have rallied and are trading near their highs of the day. Natural Gas has sold off since the open, though still up ~0.6% heading into the afternoon. Copper has pared its gains from yesterday and is dn. >1%
    • FX: USD (DXY) has rallied off its highs of the morning and is trading near its lows, dn. ~0.4% The dollar has weakened on all crosses this morning. Euro up 0.45% (next major level people talking about is 1.35) and GBP up 0.3% (1.60 is the next big level).

  127. BOP: My surprise is extremely high. I too am long. ( more than I want ) So what do we do now? Still can’t get much premium selling calls

  131. Tom. He could go same as always with a massively non operated program. Just think they should punt it and put proceeds to debt redux or higher irr projects.

  132. re 123 – going to be hard to predict how the frac crew availability question hits each operator differently. Until I can line that out, especially for the smaller names, i don’t have any business being in the common….

  133. Tom — thanks for pointing that out. Didn’t see that, but, yes. The move from B+ to BB- (while only one grade) is a huge psycho-level. And brings in a lot of new buyers.

  134. That BB- is a Corporate Credit Rating… the actual notes are rated B+. Still, nice upgrate. Summary of S&P rationale follows —
    —————————–

    S&P Raises Petrohawk Energy Rtg To ‘BB-‘ From ‘B+’
    2010-08-03 15:46:42.798 GMT

    — Petrohawk Energy’s operating performance continues to exceed our prior performance expectations.
    — Although natural gas prices remain weak, the company’s significantly hedged production volumes and completed assets sales should enable the company to preserve its moderately leveraged financial profile.
    — We are raising our long-term corporate credit rating on the company to ‘BB-‘ from ‘B+’ and raising our ratings on the company’s existing senior unsecured debt to ‘B+’ from ‘B’.
    — At the same time, we are assigning a ‘B+’ rating to the company’s proposed $825 million senior unsecured notes due 2020.
    — The stable outlook is based on our expectation that Petrohawk will maintain sufficient liquidity and prudently manage its large capital spending program in 2010.

    NEW YORK (Standard & Poor’s) Aug. 3, 2010–Standard & Poor’s Ratings Services today raised its long-term corporate credit rating on Petrohawk Energy Corp.
    to ‘BB-‘ from ‘B+’. In addition, we raised our ratings on the company’s existing senior unsecured debt to ‘B+’ from ‘B’.

    At the same time, we assigned a ‘B+’ rating to Petrohawk’s proposed $825 million senior unsecured notes due 2020, one notch lower than the corporate credit rating. The recovery rating is ‘5’, indicating expectations of modest
    (10%-30%) payment in a default. We expect the company to use proceeds from the offering to tender for its 9.125% senior unsecured notes due 2013.

    “The upgrade reflects our recognition of Petrohawk’s continued constructive trends in production and reserve growth and improved credit protection measures,” said Standard & Poor’s credit analyst Lawrence Wilkinson. The company maintains one of the most competitive cost structures in the industry and has demonstrated prudent funding of its aggressive growth strategy. Over the near term, an increasing focus on oil and liquids production, significant hedge coverage, and proceeds from assets sales should enable the company to preserve leverage at levels appropriate for the ‘BB-‘ rating category.

  136. Z – I’m holding the BEXP Aug 17.5s, in at $0.62. Trading at ~$1.15 now, but I’m wondering whether or not I should wait till their call for the trade.

    Any chance at all it sinks them? I am sort of doubting it…

  138. Re BEXP. They probably beat on volumes. Bottom line maybe in line to small outperformance. They have set the bar pretty high at Rogh Rider with long lays that IP at5000 boepd so really need to see good Pale Rider news to drive it. The TFS test at RR has been delayed so no cat there contemplating trade.

  139. If BP is able to pump into Macondo without leaking too badly from the cap, I am doubting they will ever attempt the bottom kill from RW #1. Too high risk it seems like.

    They’d probably rather just cement from surface if they are able to static kill it, P&A RW #1 given it’s OH proximity to the wellbore, and redirect RW #2 to go get some more of mother nature’s oil juices, since they already have the permit, haha.

  142. I don’t know CRK at all, listened to call wondering if HK can change the code for HS and EFS completions, it should help CRK eventually. No love on call despite beating ests. Late entry to EFS (they are buying acres now, budgeting $2-5,000/ac.). Completions and production slipping into ’11; I think mgt said completion backlog should free up by yr. end. Committing sin of outspending cash flow and not very hedged, but that becomes less a differentiator as strip spreads compress toward spot. Been in lower HS, will try upper HS: is that significant?

  143. Re #1:

    Please don’t confuse innovation with ignorance. The main difference between a Haynesville Shale well and Fayetteville/Barnett/Marcellus is that Haynesville wells have HIGH PRESSURE and HIGH surface flowing temperatures. I will attest that the proposed casing design for HK will not work for several reasons. Sorry to rant, I will now step off my soap box.

  144. #111 – adding my HK thoughts – 1. The release and subsequent news from today gives me some feeling that HK is moving further away from the multiple equity issuance sins of the past. 2. A higher credit rating is better than a lower one – paying a lower coupon is always better. 3. Knocking $1mm of each well in terms of cost gives me some comfort going forward that they are prepared for a low gas cost environment. They already have the acreage – they are absolutely learning how to produce it better and better. 4. No equity issue on the horizon. 5. They did a good job hedging some more volumes. 6. 5% oily is better than 0% oily. 7. The stock has been pretty oversold. 8. The FS sale will be a good one – as I recall their acreage was in some good spots. I’ll be curious to see if SWN is the ultimate buyer there or if it someone that has zero FS exposure.

  150. ZTRADES

    ZCAT

    WLL – Sold the 2 WLL August $80 Calls for $13.40, up 88%.

    I continue to the hold the common in the ZLT.

    ZIM

    LINE – Sold the 50 LINE August $31 Calls for average $0.63, up 152%.

    I continue to hold 10 of the August $30 calls in the ZIM and the units in the ZLT.

  152. ZTRADE – ZIM – LINE

    LINE – Sold the 10 LINE August $30 Calls for $1.75, up 238%.

    I continue to own LINE units in the ZLT.

  154. OK, blasts sent, hitting the road again. Have a good one, Petra will be monitoring comments but I’m behind the wheel for awhile now. Thanks for keeping me updated.

  155. Someone’s notes from the HK call —

    Petrohawk drilled a record number of wells in both the Haynesville and Eagle Ford in 2Q

    · 28 wells in Haynesville

    · 19 wells in Eagle Ford

    The company is carrying significant uncompleted wells

    · Petrohawk has an inventory of approximately 20 wells in the Eagle Ford and 15 in the Haynesville

    · The company does not expect this to affect the company’s production guidance or HBP schedule

    Petrohawk is focused on reservoir optimization

    · The company is employing various techniques in both drilling and completion which it believes are resulting in higher EURs

    · This includes restricted chokes as well various fracture stimulation methods

    · Petrohawk is progressing to hyrdrofracs in all areas of the Eagle Ford, which are cheaper and more environmentally friendly

    Management indicated it does not intend to enter into JVs

    · The company does not wish to give up any upside from its assets

    · Management indicated it would prefer to sell non-core assets, including the Fayetteville shale assets

    Petrohawk came to market today with an $825 million senior notes offering

    · The notes will be due 2018 and proceeds will be used to redeem the $769 mm of 9.125% notes due 2013

    · The company also extended its $1.1 billion revolver by 1 year; the revolver is currently undrawn

    · Total liquidity is currently $1.4 billion

    What to watch for

    · Disposition of Fayetteville assets

  157. KOG…For those with an interest Devon has a rig on location at the Horseshoe Basin unit re-entering and sidetracking a vertical well bore for horizontal test with total proposed vertical depth 10,800′ and 4,000 ‘ lateral. Well is a tight hole but possible targets include Baxter,Frontier or Muddy. Almost all production in the area is from Upper Createous formations. There is a possibility they could go horizontal in lower C if they have shows from vertical drill hole. There is currently no production in this unit and gas is considered stranded from lack of pipeline connections. About 1/2 mile east DVN/KOG drilled a vertical Baxter/Frontier test in 2008. The IPed for 336 bopd, 3.05 mmcfg, and 144 bwpd from commingled Frontier/Baxter perforations at 10,450’–13,369’. This well has made 13k bo and 98 mmcfg and appears to be shutin at the present time. The thought here is that if oil and/or natural gas liquids production could be established in the area, the associated gas could be flared or vented for a initial one year period with possible extension thereafter.

  158. West — thank you for that update. I’ve been waiting (and waiting) for DVN to do something with those assets. KOG has them written to zero… so if ANYthing comes of them, it’s pure gravy.

  159. BOP: BHI missed numbers and it looks like integration of BJ Services not going well. Money out of BHI and into HAL, SLB, & WFT.

  160. TomDavis — you are the expert on those names. Well done. I’m long HAL and CAM in a managed account and for the long run. So, likin’ the move today (in HAL).

  161. Tomorrow is a fairly active eco-report day, with Mortgage Applications, Challenger Job Cuts, ADP Employment Change, and ISM Non-Manufacturing Composite.

    We get the ABC Consumer Confidence reading at 5pm today.

  162. Re : EGY SE Etane Exploration Well:

    http://www.vaalco.com/html/PR/Press08-03-2010.htm

    Immediately adjacent to the SE Etame discovery well lies Vaalco’s North Tchibala field which they picked up with the original Etame Concession. It has 18 million barrels of PUD Resreves and 3 shut-in vertical wells [in Dentale Sands] which have never been produced….all or which are approx 250’deep. The N. Tchibala field also has a Vaalco subsea pipeline running through it [South to North] to their FPSO [Petrole Natupia].

    IMHO Vaalco does not need much of a discovery {in terms of reserves} in SE Etame to justiy building a single sahllow water production platform withe 5 slots which they can use to drain both both the N. Tchibala field { 3 existing Dentale Sands Veritcal wells} and a couple horizontals for SE Etame {Gamba Sands}.
    Vaalco has $100+ million in cash to use for uprgrading the FPSO [take it above 25,000 b/d oil & 30,000 b/d of fluids).

    Vaalco has lots of experience producing Gamba Sands using an OHGP method.

    IMHO they just needed some additional justification to proceed and the announcement today provides that assurance.

    The Gov’t of Gabon must declare the Field commercial………..but with 2 sidetracks, plus the original vertical there should be sufficient basis to do that.

    EGY Q2 earnings released 8/9AH and a CC will occure on 8/10 @ 11 AM EDT

    http://www.vaalco.com/html/PR/Press08-03-2010.htm

    IMHO Vaalco will use tthe CC event to announce plans to increase production above 25,000 b/d……….and may have other announcements on a JV for the On-shore Mutamba [Gabon] concession, and update progress on the Angola [Block 5 Shallow Water] concession.

  163. EGY — crys, from what I understand, from a taxation perspective, they don’t have a lot of incentive to go above the 25k/day…. unless they plan to almost double production. So they just might chose to produce the Gabon Offshore Concession more slowly and use the cash to develop onshore + Angola (assuming the govt allows an extension here) and do some sort of diversifying purchase in some other part of the world.

    What do you think?

  164. BEXP news…
    AUSTIN, TX–(Marketwire – 08/03/10) – Since late April 2010, Brigham Exploration Company (NASDAQ:BEXP – News) has expanded its acreage position in the Williston Basin by approximately 52,800 net acres to an estimated 358,200 net acres, which represents a 17% increase in its total Williston Basin acreage. Importantly, Brigham has expanded its core acreage position by an estimated 34,000 net acres, primarily in and around its Rough Rider project area, to a total of approximately 198,400 net acres. Brigham also announced the completion of the Rogney 17-8 #1H, its first Bakken well in its Eastern Montana project area in Roosevelt County, Montana, at an early 24-hour peak flow back rate of 909 barrels of oil equivalent. Finally, Brigham announced the completion of the Michael Owan 26-35 #1H and the Sedlacek Trust 33-4 #1 at early 24-hour peak flow back rates of 2,931 and 2,695 barrels of oil equivalent, respectively.

  166. BEXP on the tape. Good volume number. Nice wells in Montana. Nice add to Balkan acreage. They bumped capes by a third but it targets land and oily drilling and the have cash in hand to support. Montana looks economic for the Bakken from both well results (one as a small partner with Zenergy). This could open up a new core area for them (Pale Rider). The quarter also saw the furthest southeast extension of Rough Rider. Will have more comments in tommorrows travel post.

  167. The bexp wells may put a spring in the step of eog whose initial Montana well is rumored yo be bigger Eog should also have Niobrara news to share.

  169. Re 168, thanks. I think they have to let enough time pass so that they don’t look like they are flip flopping … in the deep water.

Comment below here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

s2Member®