Monday Morning And All Eyes Are On The Fed

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Market Sentiment Watch: Fed has a one day meeting tomorrow so expect more Friday-like action (waffling, probably a bent towards selling) until we hear Bernanke's plan for combating what increasing looking like a back sliding economy. Earnings are winding down but we have one last 2Q flurry of numbers to look at this week. Lastly, there are two weeks left in the front month options and I will be making some changes (potentially rolling forward) mid to late week.

BP Spill Watch:

  • Static Kill success. BP says pressure tests of the cement plug show it to be containing the well
  • Relief well drilling recommenced over the weekend, expect it to penetrate the original wellbore mid August
  • The Sunday Times said the Deep Water Horizon had a history of overdue maintenance issues. RIG says there was a software reporting error that caused a duplication of maintenance problems reported.

The Week Ahead:

  • Monday 8/9: No ecodata scheduled
  • Tuesday 8/10: Fed meeting (pivotal for the week), 2Q Productivity (F = -0.4%), wholesale inventories,
  • Wednesday 8/11:  EIA Oil Inventory Report, trade balance, federal budget imbalance
  • Thursday 8/12: EIA Natural Storage Report, jobless claims (F = 465,000), import prices
  • Friday 8/13: Retail sales (2nd or 3rd most important piece of data on the week behind claims and the Fed speak) (F = +0.5%), CPI (F = +0.3%), Consumer sentiment (F = 69 vs last of 67.8 and I would not be surprised if this one actually didn't miss as terribly as the last few sentiment and confidence numbers), Inventories 

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today – Earnings Calendar, WHX model, NOG, KOG and more.
  • Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $9,000
  • 67% Cash

ZIM (Zman Inefficient Markets portfolio)

  • $5,500
  • 63% Cash

Commodity  Watch:

Crude oil ended last week up 2% to close at $80.70. The 12 month crude strip is now trading at $83.54. I do not care for oil at the $80 level near term. I continue to suggest that without improved demand for gasoline (something that is seasonally on a short fuse at this juncture and less than likely given the employment data) and a "working off" of crude stocks via commensurate refining throughput, especially at Cushing, that crude is on borrowed time at these levels.  Next month, OPEC will hold it biannual meeting and oil above $80 is not going to be much of an impetus to do more than drink tea and then get back on their planes even given the recent weakness in the dollar.  The Cartel does not want to appear to be sapping the strength of a weak global economy at this time and my suspicion is that if oil is above $80 at the meeting they will walk softly on quota discipline.    This morning crude is trading up nearly a dollar.

Natural gas tumbled 9% last week to close at $4.47. The drop came despite a smaller than expected injection and the promise of an even smaller one this week.  The gas market is more concerned with the lack of significant tropical activity (see below). Also this week we have a snap of the record heat that has been plaguing much of the U.S. Finally, the market continues to be troubled by a lack of responsiveness on the part of E&Ps to the current natural gas price strip. The increasing shift to target liquids rich plays has yielded an un-welcome (if you're bullish) source of associated gas that will be produced irregardless of price. Not easy to quantify the magnitude of this gas wedge but it is not insignificant.  The 12 month strip is now trading at $4.91. This morning gas is trading flat.

  • Tropics Watch: NOAA trims hurricane forecast slightly to reflect slower than expected start to the season.




  • Weather Watch: Still

    • Week before last: Cooling Degree Days of 84 which, yielded an injection of 28 Bcf.
    • Last Week: CDDs of 86, which was much lower than the forecast of 97.  I think CPC needs to recalibrate their model again. 
    • This Week's Forecast: 101; hottest of the year. 31 points over normal and 23 points over year ago figures. This could drive a break even injection a week from Thursday or even a slight withdrawal. 

Tropics Watch: Not much to report at the moment. 

Stuff We Care About Today

Earnings Calendar - One last flurry of activity this week as the season winds down with a number of the smaller names along with some interesting new ones like OAS. All times EST.

Monday - NOG - 11am, KWK - 11 am, TRGL - 11am, PETD - 1 pm, CLNE - 4:30 pm, FPP (looking for Bone Spring comments in their press release), MHR (looking for timing of EFS results),

Tuesday -  EVEP - 10 am, BPZ - 11 am, ROSE - 11 am, EGY - 11 am, USEG - 12 pm.

Wednesday - None

Thursday - OAS - 11 am

Friday - None

Other Stuff

WHX Reports Better Than Expected 2Q Distribution

  • WHX announces $0.74 2Q vs $0.70 Street expectation and my $0.62 to as much as $0.65 number.
  • The variance to Street and me is a function of much higher than expected oil volumes. This appears to be inventories sold in 2Q that were produced in 1Q and should not be perceived as an actual rise in production.
  • Differential for oil came in almost to the penny as expected while gas was pleasantly above NYMEX. Going forward I have slightly reduced my differential to NYMEX for gas.
  • I have included a revised model below. Based on current price of $21.25, I put WHX's next twelve months yield at 13%
  • Assumptions are included with the models and followed by graphs of expected distributions, production, and oil and gas prices.





Other Stuff:

Other Yield Stuff Watch: I'll have VNR 2Q Comments and ECT--- comments in the Tuesday post.

SSN Niobrara Deal Update - nothing on the tape yet.

KOG Announces Offering

  • 25 mm share offering
  • On the call one analyst asked about the funding gap for this year and the answer seemed to that it would be made up with cash flow and potentially with borrowing from the new revolver.
  • They also updated their #13 well with an IP of 2,055 BOEpd.

    • this was the first long lateral for them but they failed to get the liner properly in place and only fracced 6,200 feet of the lateral with 15 stages
    • Same pad will see the the #13 2H with a 9,800' lateral completed later in 3Q
  • Nutshell: Um, didn't really get "deal is on the way" from the language on the call, going back and re-listening this morning. Not going to knee-jerk punt, just want to be sure my ears work first.

Earnings Briefs:

NOG Reports Very Strong 2Q Results

The 2Q Numbers:

  • Production of 1,897 BOEpd, above guidance

    • up 38% sequentially
    • and 235% YoY
    • 96% oil
    • June 30 exit was 3,703 BOEpd
  • Revenues of $16.2 mm vs $11.14 mm expected
  • EPS of $0.12 vs $0.07 expected


  • Production ramp in the quarter was due to the addition of 3.5 net wells in the Willston.
  • These guys generally take small working interests in lots of wells and are currently involved in 63 gross or 7.24 net Bakken and TFS wells.
  • 3Q guidance is now 30 to 35% sequentially.
  • Hedges:

    • 2010 through 2012, well hedged at prices around $80 per barrel.

Nutshell: Good quarter, growth remains on track and better than expected as they participate in a broad swath of industry wells across the play. I am currently not in the name. Conference call at 11 am EST.

NBR Acquires SWSI

  • May put a small bid under service names today, don't see it as a big impetus for the group.


Odds & Ends

Analyst Watch:

  • APC cut to Market Perform at FBR

Interesting Article Watch:

181 Responses to “Monday Morning And All Eyes Are On The Fed”

  1. 1
    blackgold39 Says:

    Z – thoughts on OAS calls?  Still very low profile as far as open interest and volume, big spreads, but if their call comes across well, they might be a mover on Wed.

  2. 2
    blackgold39 Says:

    NFX just out with news release, pipeline fixed in malaysia

  3. 3
    TEXWS6 Says:


    Looks like the pressure pumping sector (frac) is getting hot. Patterson-UTI bought out Key Energy Service’s pressure pumping fleet several weeks ago and NBR followed with SWSI. Hydraulic Horsepower is only going to get harder and harder to obtain as we pump more and more stages on these horizontal wells. If you want to go buy/build your own fleet you are looking at a 1-1.5 year wait time JUST for the equipment, let alone training the people. Frac companies have so much business that they are sold out for the next 1.5years of solid steady, day to day work.

  4. 4
    bill Says:

    chk has debt offerings out. Do you think they might be interest in eog assets?

  5. 5
    zman Says:

    KOG replay:


    Minute – 62 in the 2Q presentation

    Question from Morgan Keegan.

    How do fund the gap between spending and cash flow?

    Answer: (my notes from the CFO’s comment)
    The biggest delta is an increase in the borrowing base that would allow them to borrow more, along with their prepaid inventory of pipe and the ramp in cash flow.

    Lynn then added they they would need to continuously evaluate all resources of funding open to them.

    But then he was asked if they were less debt averse now than they have been historically.

    He said the whole new revolver thing was a big piece of their story.

    And today they are doing a $75mm equity deal.

    If I was that analyst I’d call them up and tell them I like to get kissed when they do that to me.

  6. 6
    zman Says:

    BG – I don’t see a reason to play the calls prior to the call. I’m long the stock but the calls are thin with wide spreads at the moment and if they disappoint the Street the pain is a bit harder to endure. If I did it it would be September calls. But I will be unlikely to add any pre call. Don’t mind missing a bit if they run on me.

    Bill – that’s a good thought.

  7. 7
    BirdsofpreyRcool Says:

    KOG — didn’t get a chance to hear the live call. But could see where they might squeek through on cash flow and revolver and JVs. Unfortunately, I shoulda read what I wrote on Friday again… “no completions, no production, no oil sales, no cash flow [or somethng to that effect].” But I think it’s a bit more than that. Hearing KOG is slow to close on a JV partner… so that might be the straw that broke the secondary back.

    Ugh. History tells me that Mr. Market will sit on KOG’s head, until 2ndary completed. I’m thinking $2.75… Ugh. Being a micro-mini in the land of tight fac crews is gonna cost us dilution in the name. It didn’t have to happen… but it did.

  8. 8
    zman Says:

    ROSE on the tape with earnings … reading. Note to E&P types, analysts hate the crowding effect, glomming on to dates at the end of the season with your calls all at the same time is a sure way to get ignored.

  9. 9
    BirdsofpreyRcool Says:

    z — just read your #5 above and agree. KOG only has about 120mm shares… so 25mm is a statistically significant slap upside the head.

    At minimum, NAV for KOG was $4/share, pre-offering. So this dilution drops that to, what… about $3.25/share? Have to say, even larger shareholders here were not expecting this today.

  10. 10
    zman Says:

    BOP – I just re-listened to that call end and I have to say its a good thing Lynn stepped in to say all options are open … or I’d be flat out calling them liars right now based on the CFO’s comment.

  11. 11
    BirdsofpreyRcool Says:

    This “micro-management taxation policy” is not good for ANY company. Today, it’s “Big Oil.” Tomorrow, it would be YOUR industry. Just wait for the “crisis” and use it to impose new taxes… not good stuff. At all. From Madison Wms this morning….

    Tax Hike for Oil Co.’s – the Senate Finance Committee is seeking to eliminate a tax deduction for the biggest oil firms operating in the US to help pay for legislation to support small businesses. The proposal is spearheaded by Senate Finance Committee Chairman Max Baucus (D-MO), would make oil companies with annual pre-tax earnings of $1bn ineligible for a tax deduction that is available to companies with domestic manufacturing and production activities. In its current form, the proposed masure would go into effect on Dec 31st, and apply to income earned in 2011 and beyond.

  12. 12
    zman Says:

    BOP – can you pick HT’s Monday brain for us? I see futures up but in front of Ben babble tomorrow and with no eco data to support today, I don’t put a lot of stock in the move. You?

  13. 13
    BirdsofpreyRcool Says:

    z — 25mm shares… it’s gonna take me a few moments to myself, to get over this. Resets the thought process on what I thought those guys could do.

  14. 14
    1520sbroad Says:

    Z – following up on the SWN release/call last week I did some more research. Corridor Resources is currently drilling a well in New Brunswick with Apache Canada. It looks like this well is going to be a horizontal where others up there have been verticals. There is a brief press release at Corridor’s website – http://www.corridor.ca

    I was on the road on friday so didn’t get to listen to the SWN call – any Canada questions/comments?

  15. 15
    BirdsofpreyRcool Says:

    Credit indices and futures in the green… foreign mrkts up.

    HT thinks we open green, trade down, then grind up into close.

  16. 16
    Jerome Blank Says:

    KOG, surprised would not even begin to describe it…but, back to now, techically speaking KOG has daily trendline and 200 day SMA support at $2.95, will watch this level this morning…

  17. 17
    bill Says:

    Remember when bexp issued shares at 10 and change, the stock kept charging forward–could kog be expecting the same?

  18. 18
    zman Says:

    ROSE –

    Eagle Ford enthusiasm but not a lot of new data.

    Alberta Bakken

    Opting to go with a vertical, 8 rig program. That is surprising. Says they have movable, high quality oil (which we thought) from oil saturated Banff, Bakken, TFS, and Nisku. This should be much shallower than the traditional Bakken over in North Dakota but wondering at the height of the intervals and why not a horizontal program to target to or more intervals with each lateral. Hmmm. They have 291,000 net acres here (nw corner of Montana) and you have to wonder at how far they will have to downspace this to effectively drain it, do they commingle or produce bottom to top, etc. I think NFX is thinking horizontals here.

    By the way, ROSE boosted their capex for the year and the stock is marked lower.

  19. 19
    zman Says:

    Bill – I think maybe after the deal but not before. This is pretty dilutive and they haven’t exactly been knocking cover off Bakken balls.

  20. 20
    tomdavis12 Says:

    Z: My weekend reading is pushing me to be more of a Sour Sally when it comes to NG pricing going forward. My concerns are: 1.Some of the NG bulls were not so bullish (Aubrey & Papa). I know you have not been either. 2.CC’s indicating increased capital spending programs. (CHK, EOG, RRC, SD, ECA & COG). 3. Increasing rig counts. 4. Weaker US$ pusing up some commodity pricing and maybe not from increasing demand. 5. Poor relative performance from XLE as an index ( yes, yes I know your ideas have kept us away from some of the bad parts of the XLE index ). 6. Weaker economy. 7. Without spinner activity we have had a colder winter and warmer summer without much reduction of inventory. If you have any thoughts to sweeten up Sour Sally I am all ears.

  21. 21
    zman Says:

    WLT running again, everything else looks pretty sleepy, as per post, waiting on BEN.

    Dear Sally

    Can’t help you on the natural gas, I suggest you look at oil although at current prices he is no cheap date.

    Uncle Papa has been sanguine about natural gas for some time now, maybe 2 quarters.

    Re spending, no kidding and no one likes it. It harkens back to the 1990s and again in 2007/2008 when things go out of control, no discipline.

    Re 7 – season is not over and I would still anticipate some shut in volumes but true enough on the inventory reduction due to high supply or maybe demand peeling back over a bit, hard to say on the industrial side. If the economy really weakens they make test $3.50 in the coming shoulder season.

  22. 22
    zman Says:

    Good to see WHX reacting to the beat, although pretty muted. I would imagine those two analysts that downgraded are either out redoing their models or trying to justify why they said to sell the name. Honestly, given what I think happened on the oil side, it is really not reason to jump up and down as it is for me to be content that they are declining at a little more shallowly than anticipated.

  23. 23
    zman Says:

    EOG – anyone see anything from the Street today? Thanks.

    JB – how does WLT look to you? Thanks.

  24. 24
    zman Says:

    JB – also ESV – I still have my unofficial trade on their, taken when they were spiking a couple of weeks back, in the $46s. To me that one is purely technical but maybe they get bought.

  25. 25
    zman Says:

    KOG – a bit surprised by the muted response in KOG today, down about 14% between Friday and today so far but not punching lower through $3. The more quickly they get the deal done, the better, anyone know if they are planning a roadshow or not?

  26. 26
    elduque Says:


    Now in southern Ontario, going to spend a week seeing plays at Stratford Shakespeare Theatre.

    Do you have any idea why GDP is trading strong, relative to peer group.


  27. 27
    zman Says:

    BP – about to break into new highs. I am looking to reposition here soon.

  28. 28
    zman Says:

    Eld – the quarter on Friday was pretty decent. I think you are seeing some covering as 15% of shares out are short.

  29. 29
    zman Says:

    NOG slipping higher, mulling a trade in the ZIM there.

  30. 30
    zman Says:

    NOG slipping higher, mulling a trade in the ZIM there.

    Tom – re SWN – haven’t read it yet, will get to it this morning.

  31. 31
    Jerome Blank Says:

    RE: #23 WLT looks good, updated the charts, the daily shows WLT breaking out above the 100 day SMA, added the P&F and 30 min…P&F price obj is $81

  32. 32
    zman Says:

    re 30 – meant 1520, not Tom

    JB thanks much.



  33. 33
    Jerome Blank Says:

    RE: #30, Zman. thank you

    ESV posted a daily chart…trading at the top of its daily channel, not a bad spot for profit taking

  34. 34
    zman Says:


    NOG – Added (2) NOG September $10 calls for $5.60 on the mid and easily

    NOG – Added (10) NOG September $17.50 calls for $0.40, also on the mid and easily.

    Both done with the stock at 15.45 after earnings, see site for details, conference call at 11 am EST.

  35. 35
    john11 Says:

    NORTH HAVEN, Maine (NEWS CENTER) – The Knox County Sheriff’s Department says Matthew Simmons, the founder of the Ocean Energy Institute, drowned at his house on North Haven late Sunday night.

    Simmons was a leading investment banker for the energy industry and had recently retired to work full time on the new Ocean Energy Institute.

    He was a leading proponent of offshore wind power and had started raising money to develop and build offshore turbines.

    He and his family had also bought and rebuilt the Old Strand Theater in downtown Rockland.

  36. 36
    zman Says:

    Thanks JB, agreed, the next merger Monday is a long way off (like 7 days).

  37. 37
    tomdavis12 Says:

    Z: When you get to SWN for 1520, I was looking for your gut feel as to weather SWN is the type of godfather to HK’s FS assets that would pay up. ( or are they like APA and always looking for the bargain route ). It makes sense to me that they would be a logical buyer and the primary catalyst for HK to go higher.

  38. 38
    zman Says:

    Matt Simmons – Rest in Peace. Apparent heart attack. He was a legend and will be missed.


  39. 39
    Jerome Blank Says:

    KOG, holding support, thus far, much better than expected…

  40. 40
    elduque Says:

    Big bounce in the BDI this morning. It has been going up everyday on small increases.

  41. 41
    bill Says:

    38 wow– I wonder if he had some BP people over for the week end


  42. 42
    zman Says:

    Thanks Eld, so far little to no reaction from the dry bulkers I watch.

  43. 43
    zman Says:

    Bill – I so knew someone would say that and you won’t be along, just mused about punting my speculative calls on the thought that some conspiracy theorist is even now penning a piece that will get some media attention.

  44. 44
    zman Says:

    NFX – I think the restart at East Belumut (Malaysia) was on the short end of the estimated repair times. Barron’s isn’t wrong when they call the name cheap. I think the Street has 2011 CFPS way too conservative at this point. I continue to own the common in the ZLT.

  45. 45
    elduque Says:

    Comment re SD.

    Why do they get penalized for cutting back on NG production. Obviously they can ramp up production dramatically if they wanted to.

    Also, to integrate two other companies into yours doesn’t go smoothly and cost benefits normally aren’t seen for at least half a year.

    Everybody seems to want each cos prod. to keep rising dramatically quarter to quarter, but really what is need is for all the major players to just hold production steady or let it decline. I realize that is not likely to happen until next year when all the HBP drilling is completed. However, the market will anticipate this at some point in time. The question is when.

  46. 46
    zman Says:

    BP has put the initial $3 B down payment into the $20 B fund.

  47. 47
    bill Says:

    SD 10 Q is out and it gave me a chance to review the hedging activity.

    Before I get to that, I suggested, last week, that they cooked the books to make q2 NI look better.

    After review of the numbers, there could have been other motives other than the one stated by Tom Ward and me.

    Sd must maint ratios of ebitda to debt that can’t be more than 4.25 to 1

    the 10 q states>

    “In the current ratio calculation (as defined in the senior credit facility), any amounts available to be drawn under the senior credit facility are included in current assets, and unrealized assets and liabilities resulting from mark-to-market adjustments on the Company’s derivative contracts are disregarded.”

    Given, they they dont get credit (in the ebitda #) for mark to market gains if unrealized, they took ie REALIZED 62.4 M by closing out some positions.

    As a bonus that helped adjusted net income as well that normally excludes unrealized gains

    So the primary motive was to stay with the debt covenants as 62.4 m more ebitda was generated and secondary benefit was the net income pump

  48. 48
    zman Says:

    Thanks Bill. Personally I’m staying away from the name a bit longer to watch it. Maybe I come back in close to the 3Q call.

    NOG call about to start. Should be a very upbeat call. Looking for talk of ever increased working interests going forward as CF spirals higher. Watching for comments on delays in well completions but since they participate in wells with the big and small crowd (mostly big), it’s likely they get less of the delay impact.

  49. 49
    tomdavis12 Says:

    Z: SD short 24%. 10+ days to cover.

  50. 50
    zman Says:

    Thad Allen saying BP is 30 to 40 feet away from the intercept. Looking to comment kill at week’s end. Watching a weather system that may cause a delay.

  51. 51
    ram Says:

    I hope NOG doesn’t take CAPEX higher.

  52. 52
    zman Says:

    That weather is between the Keys and Cuba and is given a 20% chance of development into something like a storm in the next 48 hours.

  53. 53
    zman Says:

    Ram – In the press release they reaffirmed their well count for the year, so unless they have severe cost creep I don’t see a bump in capex. If they decide to change the well count a month from now that obviously changes things.

    Call just getting underway. Notes to follow.

  54. 54
    Geno Says:

    Haynesville conversation this week. CHK has 100 wells waiting on frac. Did not know they owned 25% of Frac Tech. Also word was Encana is building there own frac trucks. Also everything that has been done to lower drilling costs is being eaten by fracs going up. They are up 56%.

  55. 55
    zman Says:

    NOG Call

    Thought so, this is their first earnings call.

  56. 56
    zman Says:

    Geno – yeah, Frac Tech has been a blockbuster story.

  57. 57
    zman Says:

    NOG Call

    NOG giving a rundown of why it pays (or may pay) to be a non-operated lease holder in the Bakken. All about capital efficiency.

    But now shifting to a rundown of the financials, hopefully they won’t read the press release next time …

  58. 58
    bill Says:

    Ok sd hedging actions

    Prior to 6/30/10

    for NG::

    they cashed in for ng 6.7 bcf in q3 and q4 for 13.5 bcf that was hedged at approx 7.75 since ng was around 4.75 that realized around 40 m of the 62.4 m

    For oil they took of the amount hedged for q3-10 and q4-10 that totaled 2.3 m bbls at roughly a gain of 10 each which made up the difference


    Now this is implied:

    On page 6 of their earnings release, it says they have 4.75 MMBBLS of oil hedged for 2010, 8.29, 9.55 and 1,46 for 2011,2012,2013 respectively.

    since these numbers are not in their 10-q
    it means they put a bunch more on after 6/30

    It could be a mistake in the release, i dont know. the numbers are too high for a mistake

    Oil hedged was 10.9 m barrels in the 10q vs 22.6 in the earnings release

    page 6


    It also begs the question

    why did you take off q3 and q 4 oil hedges and then put 4.75 m back on at 82.46 after june 30th?

    The other explanation is that the hedge position shown in the earnings release was as of 5/3 and as they say

    “Since May 3, 2010, the company has settled various 2010 natural gas and oil swaps with contractual maturity dates after June 30, 2010, and entered into additional oil swaps for 2010, 2011, 2012 and 2013. The company currently does not have natural gas swaps for 2011, 2012 or 2013.”

  59. 59
    choices Says:

    Bailed on KOG-cannot figure out what is going on with them but it certainly does not seem to be any news that’s good.

  60. 60
    zman Says:


    NOG – Added (5) August $15 Calls for $0.95.

  61. 61
    RMD Says:

    SD just stays on list of Co’s Which Always Blow It Somehow: my other candidates might include GST, GDP, GMXR, CHK, KOG, CXPO and I’m thinking of others.

  62. 62
    zman Says:

    NOG Q&A

    Ideal working interest: they participate for whatever proportional % of acreage they have in the section. Still looks like it is drifting up.

    Capex drilling for the year is $85 to $90mm

    Average per well is under $5mm, due to the concentration of wells east of the Nesson, which they are drilling with Slawson and EOG who have focused on shorter laterals.

    Not interested in being pioneers, think the Montana play is exciting but they are small there now.

    Analysts so far upbeat.

  63. 63
    bill Says:

    Im in sd and wish i wasnt

    Im waiting for a dead cat bounce to exit

    sd q3 (ebitda) wont be as good as they wont have the ng hedges for 13 bcf and oil has gone up so they have unrealized losses on mark to market for oil) i bet they wont take those, lol

    Oil output increases

    Im more convinced than ever that Ward needs a JV partner and/or an equity infusion

    I dont understand the logic of sitting on thousand of acres and doing nothing with them

    he keeps waiting and waiting and waiting for ng to turn up.

    Thats the beauty of the ard deal. He got an equity infusion and the ebitda from the oil deal while he waits for the ng market to improve.

    Since then the stock is down from 7.75 to 5.25 and TPH is probably right its worth 3 with the current pricing enviroment. Its worth more if they can develop and prove up some of their acreage

  64. 64
    zman Says:

    RMD – might as well add HK.

  65. 65
    bill Says:

    atpg like sd is in over its head with debt

  66. 66
    zman Says:

    NOG –

    Costs coming in consistently below AFE east of Nesson, and at or above west of the anticline. They are about 2/3rds east.

  67. 67
    zman Says:


    2011 will see a “materially higher amount of drilling than 2010”

    Lease expirations are not a problem for them, first come up in late 2012.

    Bill – these guys have nothing on the revolver, $400K in notes and that’s it for debt. Cash of $70 million.

  68. 68
    bill Says:

    ng is getting crushed today

    this isnt good for our beloved gassy names

    BTW, while im on the subject of hedges
    chk pulled a fast one.

    You may recall, that chk had little hedges for 2011. Now all of a sudden, they are showing 30 % hedged at 7.39

    Any of you recall the strip in 2011 going for 7.39 recently?? No me neither

    What they did was sell calls in the out years and traded that premium for a higher swap in 2011.

    That will help their 2011 PL and take that worry off the table with the analyst community which can say Oh they got good hedges for 2011.

  69. 69
    zman Says:


    They are about 70% hedged on 2011 expected volumes.

  70. 70
    choices Says:

    This came out Friday-FWIW as S & P does not seem to carry much weight-also not much new in comments:

    (Standard & Poor’s)
    We upgrade on an expected ramp in liquids production driving EPS and cash flow growth through ’12. Q2 EPS before items, of $0.18, vs. $0.73, misses our view by $0.07 on pricing miss. Liquids volume is up 43% on Bakken growth where it runs 12 rigs. EOG sees production up 13% in ’10 and 19% in ’11; lifts capex $500M to $5.6B; and will sell some gas assets. On a $0.05 Q2 non-cash gain and a ramp in liquids, we lift our ’10 EPS estimate $0.09 to $1.98 (with $0.02 gain in H1) and ’11’s by $0.60 to $4.24. On updated NAV, DCF and relative metrics, we up our target price by $12 to $121.

  71. 71
    zman Says:


    NOG – Added a starter position during the conference call at $15.71. See site for details.

  72. 72
    zman Says:

    NOG Q&A

    Question re 3Q10 guidance of 30 to 35%? Seems conservative?

    The guidance is always subject to completion delays. Our production is so young that the variability is almost all due to completion timing. Sounds like yes, they are being conservative.

    Thoughts on winter activity by Slawson and EOG? They’re asking the question themselves. They see the added cost of winter completions is multiple of hundreds of thousands. Intelligent discussion regarding a great rush to get wells on pre November this year due to the strip. Last year you had a large contango so the added cost of winter completes didn’t hurt that much. This year, the strip is much flatter so you aren’t as advantaged or unhurt by working through 20F temps. So again, expect a rush of activity pre winter.

  73. 73
    bill Says:

    40 elduque


    at the bottom of the article are the daily indices for the last 10 days or so

    Yes, trying to rise off their lows

    I read that the wheat ban from russia will help Supramaxes

    If true, EGLE is a pure play in that segment

  74. 74
    milepost_43 Says:

    Kinder Morgan eyes REX backhaul in light of Marcellus gas growth…better netbacks coming?? http://www.platts.com/RSSFeedDetailedNews.aspx?xmlpath=RSSFeed/HeadlineNews/NaturalGas/6260213.xml

    Pipeline company Kinder Morgan Energy Partners is mulling the option to
    backhaul natural gas supplies on its Rockies Express Pipeline, largely because
    of the boom in shale gas production near where the line ends.

    The opening up of significant supplies in the Marcellus Shale in the US
    Northeast is calling into question transport economics, with backhaul — the
    movement of gas from a point on the pipeline to one upstream — one option
    pipelines are considering, sources said.

  75. 75
    zman Says:

    NOG Q&A

    Very little of the 2Q beat was well timing, more from better than expected well results.

    They are going with 25% to 35% sequential growth for 3Q and then in out quarters, at 20 to 30% growth(sequentially) through at least 4Q11.

    Tone of the call was quite positive, lots of “good quarters” and “thanks for hosting this CC”

    Call ending…

  76. 76
    zman Says:

    Bill – that 2Q EGLE presentation was impressive, stock still hanging at $5. Would be a nice opportunity if all the stuff in the macro section of the slide show comes to pass.

  77. 77
    zman Says:

    WLL reacting nicely to oil

    NOG should react nicely to numbers that are certainly going up to reflect the 2Q beat and the 3Q strong guidance.

    WLT strong as well, industrial numbers due out of China mid week.

    Everything else pretty much treading water waiting on Ben.

    Going for a run, back in 30.

  78. 78
    bill Says:

    Buy nnaws warrants at 1.35

    For every 4.25 warrants you get 1 share of NNA. NNA is thinly traded and at 6.20

    4.25*1.35=5.74 for one share of nna trading at 6.20 (8 % in 2 weeks)

    risk is NNA trades lower as we get to 8/22 expiration date.

    NNA is a new operating company 60 % owned by NM that will play in the tanker segment

    They are buying tankers at todays historicaly low prices, locked them in to long term charters and at some point maybe a year or two will pay dividends.

    If the tanker rates recover , asset prices will move up so there is a cap gain component to this as well

    Even though there is 8 % arb potential in 2 weeks, nna is hard to short. Im looking at this is a cheaper way to get into nna which came public at 9 and has a good business plan ( assuming you like tankers)

  79. 79
    zman Says:

    JB,re NOG = cup and handle breakout in progress I think. Thoughts?

  80. 80
    AAA Says:

    Is there a pure play on the frac tightness? CRR? How about something like BWA?

  81. 81
    choices Says:

    Disputes anti-fracking arguments


  82. 82
    choices Says:


    Z, operating exp were substantially higher in Q2, oil production down below guidance-
    the earnings miss was larger than I first thought-0.18 vs consensus 0.23-25

    Have you had any further thoughts as to EOG making numbers (coming close) in the quarters out thru 2011-the projected growth is substantial-emphasis on projected (or expected).


  83. 83
    zman Says:

    re 80. Not pure but it benefits = HAL

    re 82
    Expenses on a $/ BOE basis a function of not making the oil target in the quarter. Note that they didn’t change the guidance for the year though. They are not big into missing and not repeatedly. And they care about EPS a lot more than I do. They beat on CFPS which is the best measure of what the firm can afford to do, where eps is largely an excercise in accounting for E&Ps, especially with regard to non cash pieces of production being pretty variable from DD&A to deferred taxes. Anyway, guys like TPH were upset on Friday and then surprised at the bounce off the lows today and, today, reiterated their Accumulate rating.

  84. 84
    zman Says:

    Stocks just marking time now, wow boring action.

  85. 85
    zman Says:

    PETD call in 15 minutes, not a lot of meat in the quarterly pr, but the CEO is talking to enercom regarding the Niobrara.

  86. 86
    zman Says:

    PETD interview with the CEO


  87. 87
    ram Says:

    ZMAN – Are you surprised that other than S&P, nobody has come out with an upbeat response to EOG?

  88. 88
    bill Says:

    tom ward on hedges from ccall

    Tom Ward

    Sure. That’s fairly easy to walk through. Today, we’ve hedged in oil at $86 and change, close to $87 per barrel, and we make very high rates of return on every oil well we drill. Today’s gas prices is, obviously, at a place that you can make some rates of return on a well basis, but it’s hard to project real high rates of return. What we did was, as you know, we did not have hedges in place post-2010 but did feel that the market was overly bearish on natural gas and even, for a short period of time, oil and pulled off hedges on natural gas early through the rest of 2010. The reason to do that is just that we’re making a long-term call on natural gas being higher, but we were making a short-term call that, looking out through the August through December period, when we pulled some gas off of June, that the prices would be higher than what they were in June when we thought it was an overly bearish situation. We still believe the market is overly bearish, and therefore we have not hedged any of our 2011 gas yet. That doesn’t mean that sometime this year, we won’t hedge 2011 gas. We think that there is still, in the market today, a perceived thought that gas supply will be higher than we think we’ll be end of October. We’re more in the 3.75 to 3.76 Tcf range. We think there’s some constraints coming out of the Haynesville and maybe in the Marcellus and that, that might not into the marketplace, but still believe that 2011 could be challenged as you bring on Tiger out of the Haynesville and have other capacity constraints relieved. And also, we think wells aren’t coming on quite as quick as the market might be believing, in the gas market, anyway, for 2010. So if you look at a harder time to bring gas wells on, just because of — in the Haynesville, especially, having a longer time to bring wells on because of fracking, and then maybe some pipeline challenges, we believe it was a good time to take off gas. If you look at our history, we haven’t done that very often. In fact, only one other time in the history of the company have we pulled any hedges off, and that was, I think, in 2006. So it isn’t something we do very often, but in the short-term in both of these cases, we felt that it was the appropriate thing to do. And that doesn’t mean that we won’t be putting back on gas hedges by the end of the year

  89. 89
    zman Says:

    Analyst Watch:

    EOG Cannacord trims target from 109 to 106 but reiterates Buy.

    Ram – no, not really, looking at the upgrades / downgrades pages today, they are very short. Everyone holding breath in front of Ben tomorrow.

  90. 90
    ram Says:

    So 6% is still a buy? What’s wrong with these people?

  91. 91
    Pati Says:

    BOP, any news on CIGX today?

  92. 92
    zman Says:

    Ram – In my day, that would have been a hold. I think TPH is up around $139 and they are at accumulate which is sort of like a “weak buy”. Go figure.

  93. 93
    zman Says:

    WHX – creeping back up. Here’s to wondering if those two would be analysts who cut it to sell on the same day and multiple days after the last distribution (guess they share the same couch analyst) will now upgrade the units.

  94. 94
    BirdsofpreyRcool Says:

    Pati — no new news on CIGX today. And NO reason for it to be down. Just share-shuffling and computer-driven trading, I guess.

    Thought the launch by inVentiv would kick the stock up to a new (higher) handle. So, just scratching my head over the sell-off. Bought some “trading shares” on Friday. So, clearly didn’t believe the stock would continue to fall on the news.

    Waiting for some independent study efficacy data to be uploaded to the CigRx website (which I’ve seen… and it’s impressive). But, other than that, the only “scheduled” release of data would be on sales and re-order rates. And those take some time (by definition) to play out.

    Continue to be comfortable with my investment in CIGX. Just not happy with the daily volatility. Seems to come with the territory, tho.

    10Q should be out tonight. They have been burning through about $5mm of cash/quarter. Maybe it was a little higher this last quarter on getting ready for the launch. Will be interested in reading what they say in MD&A and what is buried in the footnotes. If you read no further, it is usually worth reading the first couple of paragraphs of the Qs. So, will be looking for that tonight.

  95. 95
    ram Says:

    Is their like a chief editor for these analysts before they publish info. to the world? Don’t they realize people make fun of them for saying dumb things?

  96. 96
    blackgold39 Says:

    NFX tracking higher, possibly on the pipeline news.

    Should be expecting breakout within the next quarter or so from them, as the conversion of any one of their new plays (EFS, SAB) to the proved category will be a big catalyst.

  97. 97
    Pati Says:

    94, BOP, thank you very much.

  98. 98
    ram Says:

    BOP – Are you a big fan of REIT’s (commercial) and their dividends?

  99. 99
    blackgold39 Says:

    Z – Wondering aloud when the BP Aug 45s will become endangered species. I have confidence the relief well can intercept by expiry, but I doubt very seriously that the whole operation will be done by the 21st.

    Truthfully, it shouldn’t matter much at this point because the well is dead, but the stock seems to still be waiting on that event to move into where I expect it will reside until the full liability is delineated, which should be the $45-$49 range.

  100. 100
    zman Says:

    BG – I can never tell when the market will decide to appreciate those guys. Great assets, great team over there, just always discounted by the market. It appears the transition at the top has been pretty smooth following Trice.

    One NFX allum can be found here along with one tough nut from Spinnaker


    Anyone know when they come public?

  101. 101
    BirdsofpreyRcool Says:

    ram — don’t know enough about valuing REITS, to be a big fan. I do own one REIT… but it’s a doozy (no surprise, eh?). I credit the fine work by wcoaster, for pointing this one out. RSO. It seems to be well (enough) managed and pays out a WHX-like dividend.

    Sure CRE is tough… and while the “worst” may still be ahead of us, it’s the unexpected stuff that usually bites you in the bum the hardest. People have been “waiting for CRE to fall off a cliff and kill everyone” (like residential) for a while now. Once everyone is looking for it to happen, it rarely plays out as bad as feared.


  102. 102
    zman Says:

    BG – My plan is to take them out on the next market pop and then reloading just before expiry. Agreed the market seems to be waiting on that and agreed that if this were any other well everyone would consider it to be controlled. I think not only is it killed but its a waste of money to do the bottom kill here unless they have evidence that the top kill is not going to hold which I don’t see happening. If I were them I’d sell the lease and two shiny new wells to a 3rd party. Don’t know what hole size those are so you might need a bigger bore to effectively produce it but you’ve taken the exploration risk out of the whole E&P equation.

  103. 103
    zman Says:

    Whatdoyaknow … EOG green.

  104. 104
    blackgold39 Says:

    re 100 – Z, Do you think the perennial sub-peer group valuation of NFX contributes to buyout discussions among interested acquirers, or would you think that would take place regardless of the valuation? ….clearly it will have come bearing, but I am wondering if it makes them a bigger target, or if you believe Boothby would only agree to a buyout under terms that valued the company at the same premium it’s peers would require in the same circumstances.

  105. 105
    1520sbroad Says:

    I went thru the SWN cc transcript – a few mentions of activity in New Brunswick – gathering data, getting ready to shoot seismic, still evaluating, etc etc was about all I could find.

    Most comments/questions from analysts were on marcellus activity and their sale of east texas assets and what they will do with those proceeds in a 1031 exchange.

    Nothing too exciting in my book.

  106. 106
    blackgold39 Says:

    re 102 – agreed on the bottom kill. you’d think those 2 partial wells plus the de-risking would fetch a fancy price, less the cost when you consider the regulatory oversight any further drilling in that block will entail….

  107. 107
    1520sbroad Says:

    #101 – RSO – another piece of the Cohen family REIT collection. See also RAS and my personal favorite the RAS preferreds A,B,C series.

    I don’t know RSO as well but RAS is now being run by a guy named Scott Schaeffer. they have their operation back on the rails after a disastrous venture into the CDO management arena. The common is still highly speculative but the preferreds have paid throughout 07,08,09 and 10.

  108. 108
    zman Says:

    BG – good question, don’t know his mind on that but I say why go for a discount with the long term price of oil being up and to the right almost certainly? It’s one of the few names I hold that I hope I can hold for 10 years but don’t think will happen.

  109. 109
    jat Says:

    re 100, it was my belief that common was selling itself privately. didn’t they flip their eagleford a month or so ago for like 10k acre, pre PXD-Reliance?

  110. 110
    blackgold39 Says:

    re 102 – Z, BP looks like they will be drilling the last bit of RW #1 on about an 8-3/4″ hole. Last csg string was 9-7/8″. Macondo had 7″ csg to TD, so this well could conceivably be the same production design if it were temporarily abandoned right now.

    On RW #2, they set 11-7/8″ csg at about the same depth that RW #1 did before suspending activity on it, so it too could be used to produce the reservoir, assuming the development spacing could be achieved with the current penetrations.

    Might be useful data to keep in the back pocket in the event a smaller third party emerges that the purchase could impact…

  111. 111
    zman Says:

    Was on a call, why is CNBC talking about Iranian subs all the sudden?

    Thanks much BG – I’d like to see them TA those holes then.

    Thanks Jat, I don’t see those guys sitting on the sideline long.

  112. 112
    zman Says:

    SSN should have a pr out late tonight or early tomorrow on the deal progress.

    Most interesting things tomorrow are EGY and USEG

  113. 113
    ram Says:

    BOP – It’s RSO that I was thinking about as well. It has had a consistent high yield for several years. If commercial comes back, you get appreciation as well.

  114. 114
    bill Says:

    contango with a “new” presentation


    page 7 is interesting

    mcf total cost to produce is 1.93 per mcf

    sd interest cost per mcf is over 2.00 let alone all the other expenses

  115. 115
    zman Says:

    Thanks Bill, will peruse. No kidding on the cost comparison.

  116. 116
    zman Says:

    Thanks Bill, will peruse. No kidding on the cost comparison.

    Note in that chart on page 7, WLL and DNR activities include enhanced oil recovery. Worth noting only because the chart would make one believe they are in the upper end of the range and therefore poor operators but CO2 floods on that piece of their production are costly ventures but still economic ones. Sort of need to show those with and without the EOR stuff included to be fair.

  117. 117
    zman Says:

    Listening to the PETD replay now.

  118. 118
    ram Says:

    BOP – Is RSO a good bite at this juncture or wait on a pull back?

  119. 119
    VTZ Says:

    Hey Z – How much more upside could you see in WHX considering they are coming up to some resistance overhead and the huge run since the downgrades? In terms of yield, where do you think they should trade in relation to their peers?

  120. 120
    BirdsofpreyRcool Says:

    ram — RSO is a very high-beta stock. I last bought it in the low-5s. At the very minimum, I would wait for a down-day to establish a toe-hold. I thought their last earnings report was pretty solid. But, they sling around a lot of securities sometimes…. and they own lots of different stuff. A colleague who does REITs exclusively (and who doesn’t own RSO) calls it the Forest Gump of the REITS… “it’s like a box of chocolates… you never know what you’re gonna get.”

    1520s — was it you who made the side-splittingly-funny comment, months ago, that every time a Cohen gets married, they give ’em a REIT to run, as a wedding present? That produced a coffee-spewing moment for me, I laughed so hard.

  121. 121
    bill Says:


    the drybulks are moving

    egle up 6 %, nm up 5 %

  122. 122
    Pati Says:

    Re BP, I read the Feds want the BOP for evidence.

  123. 123
    1520sbroad Says:

    #120 – I don’t think that was me – it is true though. I know BSJ followed the Cohen family saga so that may be where that comment came from.

  124. 124
    zman Says:

    Re WHX – think it should trade at 10 or 11% yield so maybe 25 to 27 given my price deck.

  125. 125
    zman Says:

    Pati – saw that, thanks, they’d need the bottom kill done to get the BOP off it.

  126. 126
    ram Says:

    What did she do?

  127. 127
    zman Says:

    BP also off a little on Texas AG filing suit over refinery pollution.

  128. 128
    BirdsofpreyRcool Says:

    ram — you continually crack me up… 😉

  129. 129
    BirdsofpreyRcool Says:

    EGY making a nice little run for the border, ahead of earnings announcement tomorrow morning.

    crys having a good, non-goat, day!

  130. 130
    zman Says:

    BOP – I’ve been asked if you will give the play-by-play on the EGY call?

  131. 131
    bill Says:

    drybulk report


  132. 132
    zman Says:

    PETD – running post call, got interrupted, liked what I heard, will circle back.

  133. 133
    Nicky Says:

    Afternoon all.

    Been a bit tied up today with computer issues but wanted to pop by and just say that we are moving into the extended range for the minor cycles to put in their tops. We are into the Gann and Bradley turn dates too. Resistance is at 1135 – 1150 so I personally am looking for a top in that area.

  134. 134
    zman Says:

    EGO back into trip digits.

  135. 135
    BirdsofpreyRcool Says:

    z — i expect to be on the EGY call at 11 am ET. But I am no where near the good on-line note taker that others are. Will do my best. Really like the Pres/COO there. He knows his stuff.

  136. 136
    RMD Says:

    listened to CWEI’s short conf. call. Colorful & direct. Wolfberry: wrote off some leases in Sterling Cty (‘east side of play’), drilled 65 wells so far in Andreas (?)Cty on nw side of play with ~135 locations left. EFS: have ~200m acres. 1st well 250b/d IP, 9 stages, 14400 boe produced so far, 40 b/d now, cost $2.6mm, may pay out but non-commercial to us. 2nd wellswill be 13 stages, $3.6mm. Location less pressured than EOG’s, shallower, lower IPs but longer lived if commercial.
    Ended call with ‘God bless Americal and keep fighting Communism in Washington”. No reason to have to guess where he stands!

  137. 137
    crysball Says:

    EGY is sitting at 52 week high going into the CC call tomorrow. However, having eaten grass on multiple occasions will stay in the barn and let BOP cover the EGY CC at 11 AM EDT tomorrow.

    SSN still has not returned the 25% cash deposits on the stock option exercises to any of the multiple brokerage houses.

  138. 138
    dij Says:

    I received a strong recommendation for NLY, with a 15.5% return.

    Any thoughts?

    What is the differenec betwen RSO, “a finace company” and NLY, which “manages and finances a portfolio of real estate related investment securities”?

    Big question, I know. Unless they are in essence the same.


  139. 139
    bill Says:



    i love it

    God bless America and keep fighting Communism in Washington


    Contango was a little softer when Peak said>>

    The talk about criminalizing errors in judgment, or equipment failures –reflects how out of touch with the real world Washington is

  140. 140
    blackgold39 Says:

    BP sliding late in the day, must be some other forces aside from that AG filing. That will be a minimal penalty based deal.

  141. 141
    bill Says:

    nly is a mortgage reit

    Do you think they all will pay?

    tma , lum in same business went belly up

  142. 142
    zman Says:


  143. 143
    BirdsofpreyRcool Says:

    dij — i’m not an expert in the REIT area… RSO is the first one i’ve ever bought. So, there may be others around here who are better versed in the topic. One thing I do know, however, is that a couple of the institutional guys in the area own both RSO and NLY. I think that RSO does some of what NLY does… but RSO seems to do more across a broader swath of the capital structure than NLY (just my impression, don’t own NLY). Perhaps someone else can comment.

  144. 144
    zman Says:

    CLNE on the tape, a little above expectations.

  145. 145
    zman Says:

    Bad day for a container ship:


  146. 146
    zman Says:

    WLL on the tape redeeming $150 mm of 2012 and $220 mm of 2013 debt early. Using the revolver to fund it. I would bet this means hello equity offering in the near future.

  147. 147
    bill Says:

    370 m divide by 90 is 4 m shares

    or the debt market looks very receptive

  148. 148
    zman Says:

    Bill – thought about that but since they didn’t just swap it ANd because the price is up at a triple top, I think it’s equity. Honestly think they are selling shares at $90 too cheaply but I’m sure they have their reasons.

  149. 149
    BirdsofpreyRcool Says:

    WLL — nah. Both those WLL debt issues were trading above the call price. Just makes sense to call ’em and reterm ’em out in the Fall.

    WLL has debt coming due in 2012, 2013, and 2014. Just makes sense to call the 2 nearer maturities and term it out 10 yrs. There is good demand for BB corporate debt right now and that takes refi risk off the table for 3 yrs or so. Should allow them to extend the maturity of their revolver too (haven’t looked, but banks don’t like to have their maturities extend past the big subordinated stuff… and WLL has $370mm of debt between the two issues they are calling).

    Wouldn’t be surprised if WLL annouced a $500mm offering in Sept or so. $500mm would make it a “benchmark bond” included in the HY index… so, anybody who manages $$ against an index has to think of a reason NOT to own a $500mm bond (which is a different exercise than “do i buy this?” it becomes “what if i DON’T buy this, will i underperform?”).

    Just my thoughts. But, unless there is some sort of large asset acqtn WLL is contemplating, I would be surprised to see an equity offering to replace the debt being called.

  150. 150
    zman Says:

    Thanks much BOP, you are the voice of reason.

  151. 151
    BirdsofpreyRcool Says:

    ha! But, i’ve been wrong about equity offerings before… see: KOG.


  152. 152
    bill Says:

    nice site


    if you click on the hub you can see a graph of the daily cash prices

  153. 153
    zman Says:

    No, I am deleting what I wrote for tomorrow and replacing with your stuff on that, good stuff.

    On the KOG, well, at least they didn’t bag you to your face like they did to that analyst.

  154. 154
    Pati Says:

    BOP, so . . . thinking about ordering some CIGX tabs to try. Don’t smoke, but you feel soothed, take a little of the edge off?

  155. 155
    BirdsofpreyRcool Says:

    One last caveat on my “WLL ain’t gonna issue equity to replace that debt” comment. Please tell me that they are not one of the ones overspending cashflow on capex… are they?

  156. 156
    bill Says:

    149– wow what good info….and speculation!

    I want wll to dip to mid 80’s

    Cheapest oil stock out there as far as multiples are concerned,oily,hot bahken area, seems to be well managed

  157. 157
    bill Says:

    When is the ng glut officially declared over?

    YOY Deficit is about 175 as of today.

    Traders must feel storage will blossom when we get to sept

  158. 158
    zman Says:

    At last check, WLL was going to underspend fairly easily.

  159. 159
    BirdsofpreyRcool Says:

    Pati — like catnip on cats, it works better on some people than others. The first time I tried it, I took 2, just to make sure I “felt something.” I did. It’s just a touch of a “zen” feeling. The next few times, just took one (didn’t get as distinct a reaction).

    But if there is even a REMOTE chance that the compounds in CigRx will supress the Nasties that Cause Alzheimers… well, shoot, i’ll take one every day for the rest of my life… and have minty-fresh breath to boot!

    I’m looking to Roskamp to confirm or deny any linkage between the CigRx compounds and Alzheimer’s treatment. Definitive data would probably take years. But, just like taking a baby aspirin a day to reduce the chances of a heart attack, if there is any truth to it, it’s worth it. JMHO, of course.

    Hearing annecdotal evidence from people who smoke and/or dip, that one CigRx does replace the “feeling” one gets from smoking/dipping. I’m thinking that, for people who get addicted to cigarettes or chew, perhaps they just have more sensitive receptors to the active “zen” compounds, so they “feel” it more. Would be interesting to get a group of people together to test out that theory.

  160. 160
    zman Says:

    Bill – were still up about 2 Bcfgpd, so all other things being equal, we will build storage pretty quickly a the end of the injection season.

    First day of soccer practice, it’s 100F here and cloudy.

  161. 161
    bill Says:

    If we get 3 more weeks of mid 30 injections, we are looking at 3.8 tcf in storage and thats with no hurricane impacts

    Offsetting this are E&P companies that need/want to hedge

  162. 162
    BirdsofpreyRcool Says:

    EXXI out with their YE reserve report (their FYE is june 30th) and a preliminary discussion of their 4FQ 2010. Revenues and EBITDA for 4Q came in as expected. Quarterly production was a bit light, but they had pipeline issues for most of that quarter. Sorry to see that they didn’t include what the current daily production is.

    Also, Netherland, Sewell looks like they will only assign Davy Jones “contingent resources.” I can’t argue with that (although I’ll bet Schiller tried to). That said, NS says that Davy Jones could hold as much as 841mm BOE (104mmBOE net to EXXI). If you slapped a $15/boe value on those barrels, you get roughly $1.5 billion. EXXI’s mrkt cap is currently $871mm. The DJ#2 well might be enough to convince NS to bump some of those contingents into P1 and/or P2. That will be a nice payday for EXXI stockholders, I would think…

  163. 163
    BirdsofpreyRcool Says:

    hmmmm…. since DJ is nat gas… $15/boe is probably way-high. So, using 6:1 conversion, means 624 Bs of nat gas reserves… at, what, $1/mm?, that would be around $624mm. Still comps nicely to EXXI’s current mrkt cap of $871mm (not fully-diluted… there are those pesky perpetual converts out there).

  164. 164
    dij Says:

    Thanks for the NLY -RSO.

  165. 165
    PackMan Says:

    Ram, BOP … REIT sector is completely divorced from reality. To me, certain funds have learned to game the sector through ETF trading.

    I see very little legitimate investor interest in REITs. It is possible that some are buying for the dividends.

    The sector is a disaster waiting to happen. They are priced to fantasy; some are trading at or near all time highs after factoring in dilution (SPG for example, one of the biggest and “best”).

    Real estate values are off 40-60%, yet these companies are near highs ? Insane.

  166. 166
    BirdsofpreyRcool Says:

    PackMan — thank you for weighing in. I don’t follow NLY, but I do follow RSO. RSO raised cash about 9 mos ago and again recently, to put to work, buying mortgage securities at 40c on the dollar. So, that refects your comments above. Also, RSO doesn’t do equity, but various tranches of debt. That said, their capital base includes debt, so it is a leveraged return.

    No argument from me, that this stuff is risky. Hence, the almost 16% yield.

  167. 167
    BirdsofpreyRcool Says:

    (and RSO — at $6.34 — is no where near it’s $18+ high in 2007, but it is moving closer to it’s 52 week high of $7.55.)

  168. 168
    bill Says:



  169. 169
    zman Says:

    APC selling 7 yr debt tonight for 6.375

    CHK selling $2 B debt tonight in 2 tranches, at 6.625% (10 yr) and 6.875% (8 yr).

    So maybe WLL is just swapping for a lower rate.

  170. 170
    BirdsofpreyRcool Says:

    I don’t think WLL is doing it to get a lower rate. They may get a bit lower, but APC is a cross-over issuer — junk-rated (highest level) by Moody’s and investment-grade rated (lowest level) by S&P.

    CHK is lower rated than APC, but still a tad higher than WLL. However, CHK has a LOT of issues outstanding. So, there may be a little “scarcity value” in WLL debt.

    All else equal, WLL debt should trade a bit wider than CHK, tho… so, may price around 7 – 7.125% or so (just guessing). BUT, that is also calling debt due within 2 yrs and replacing it with debt due in 10 (if i am guessing at their intentions correctly). I think it’s just a matter of looking at the next 4 yrs of debt maturities, and spreading them out and extending. Smart balance sheet management. Feed the High Yield Debt Market when it’s hungry.

  171. 171
    bill Says:


    what would sd debt get priced at

  172. 172
    BirdsofpreyRcool Says:

    SD 10 yr notes are currently trading around par with a 8.75% coupon. So, depending on the maturity, somewhere between 8.5 and 9.0%

  173. 173
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    Steady Ben

    Too often in this business the current price action radically shifts the underlying expectations of market participants. The way these expectations shift often create the potential for market disappointment or upside surprise that catches investors flat-footed. We have a lingering concern that due to a confluence of events, tomorrow’s FOMC meeting has a higher than normal risk of investor disappointment. The key moving parts are the sub-3% 10 year Treasury yield; a 17% equity market correction; FOMC Voter Jim Bullard’s concern that current policy increases the likelihood of Japanese style deflation; the “Double Dip” fears soft patch of economic data and the WSJ speculating the Fed may begin re-purchasing securities using proceeds from interest payments, pre-payments and maturing assets of the asset purchase portfolio to keep the Fed’s balance sheet at its current size (Replacement Purchases). The sub-3% 10 year Treasury yield alone was enough to start speculation about a second round of Quantitative Easing (QE2). The other events add a great deal of fuel to that fire. One problem is that any hints at a shift in that direction should come from the Fed Chairman himself, and Chairman Bernanke has held the line on his recovery forecast.

    As we noted, the movement in asset prices often shifts market expectations. As market participants, we are all guilty of it at one point or another. The key to a clear focus is determining whether the events (as opposed to asset price moves, albeit asset prices can be events) that have transpired are material enough to garner a change in policy. The confluence of events mentioned earlier makes tomorrow’s FOMC meeting the most interesting meeting of 2010. Up until now throughout the majority of the year, the key question has been whether the “exceptionally and extended” language would be removed. Now the question is whether we are going to see the pre-cursor to QE2 (Replacement Purchases). The irony is that it was 10 months ago in the November 2009 FOMC meeting when the speculation started ramping up for the FOMC to remove the “exceptionally and extended.” In addition, in Q4 2009 and Q1 2010, the majority of Fed speaking engagements and testimony focused upon the “Exit Strategy” out of fear of the potential inflationary spiral QE could cause. From our perspective although much has transpired, that is a fairly radical shift in market expectations, especially since the FOMC spent the first half of 2010 toiling with whether or not interest rate hikes or asset sales should come first. Ultimately, they decided on rate hikes. Although the recovery is less impressive than anyone would like, the expectation all along was that this would to be a jobless recovery.

    Back in early April, just a couple of weeks prior to the S&P 500’s 2010 peak, we discussed the “Dominant Doves” at the Fed because of the March FOMC minutes. “A few members also noted that at the current juncture, the risks of an early start to policy tightening exceeded those associated with a later start, because the Committee could be flexible in adjusting the magnitude and pace of tightening in response to evolving economic circumstances; in contrast, its capacity for providing further stimulus through conventional monetary policy easing continued to be constrained by the effective lower bound on the federal funds rate.” The recent shift in market expectations has pushed the tightening expectations for many market participants from 2011 to 2012. It is our view that, while conceding some additional economic weakness, the Fed Chairman’s view on the economy has not changed much since then. In other words, it is the market’s view and expectations that have shifted while the Fed Chairman has remained steady in his outlook. What appeared to be dovish rhetoric in April sounds much less dovish today.

    This all sets up for tomorrow’s big meeting. The most important factor to recognize is that even the most gradual shift in policy will convey to the market how much credence the FOMC puts into the confluence of events leading up to this meeting. For example, if this meeting is the one where the FOMC decides to implement Replacement Purchases as a strategy even if for a clearly delineated reason, the market may go one step further and insinuate it is really out of Double Dip fears or the Bullard Japan scenario. After keeping a fairly even keel throughout the first half of the year, a move tomorrow would be viewed as blinking in an almost panicky fashion. The even greater risk would be that if the market interprets a move to be for a more significant reason, i.e. Double Dip or Bullard Japanese Deflation and the move is taken for a less concerning reason, such as simply finally deciding on Replacement Purchases, which create a very large gap between the market perceptions and the policy response and would be an overwhelming negative. At that point, the FOMC would find themselves chasing the psychological moving target of market expectations, something at which they are awful at doing, and can never actually catch.

    Here is how we would handicap this question Replacement Purchases and the market reaction.

    · If the Fed does nothing, then there will be a negative short term reaction due to market disappointment that the Fed is doing nothing. After the market digests its fix of stimulus not being delivered, it should be interpreted as the Fed seeing its forecast as remaining on track despite recent events.

    · The Fed implements Replacement Purchases. As we noted earlier, this risks becoming the worst outcome. The market may view it as the Fed conceding the economic weakness, but keeping the balance sheet status quo and not doing anything new about it. That is simply a dangerous combination.

    · The Fed says it is not implementing Replacement Purchases, but is re-opening the asset purchase program in case they decide they want to commence the Replacement Purchases (and any additional purchases the deem necessary) should the economic environment warrant it.

    That final option is the one we view as the best. The Fed buys themselves time to allow their forecast to play out, but indicates they are still vigilantly watching and are prepared to head off a double dip or deflation in short order. The Fed recently took a similar action in May and thus far it has proven successful. As the European Sovereign Debt crisis erupted, the Fed re-opened the Dollar swap lines with foreign central banks in order to ease the dollar funding pressures overseas. In retrospect those swap lines where barely used (Chart 1), but the Fed illustrated it was prepared to act decisively if necessary.

    Ben Bernanke does not need us to tell him this, but If the Fed has legitimate concerns, then it should act quickly with overwhelming force. The fact is with the exception of Bullard’s research, which he described as contingency planning, Fed members despite modestly downgrading their outlook, have publicly remained constructive on the recovery. The most important thing for the FOMC to do tomorrow is to avoid falling victim to the game of market expectations. The market always indicates it wants an inch, but by the time it is done, it takes a mile. Chasing market expectations creates a negative feedback loop that then needs to play out. The healthiest course of action is to disappoint the market quickly and shake out the weak hands than create this game of chase that policy makers never win.

  174. 174
    PackMan Says:

    RSO; don’t know it well but on a quick look it looks like a highly leveraged black box. Many of those structures have ended quite badly for other companies.

    NLY; my recollection is they were like a TMA, except they focused on GSE paper; so to the extent there is a real or implied backstop, that prevented them from going the way of TMA. That said, it seems to be nothing more than a trading vehicle since the meltdown. Buy 14-15; sell 18-20.

    Personally, I wouldn’t touch either one particularly as an “investment”, but until the next crisis hits, they, like other REIT stocks, are tradeable w/ yield.

  175. 175
    PackMan Says:

    BOP, to look at the destruction in the sector, take a gander at what happened to TMA, AHR (now ACPI), GKK, NRF, CT, JER to name a few that I can recall.

    By the way, your pal Leon Cooperman owns (or owned) something like 10% of NRF (at much higher prices).

  176. 176
    Bob Says:

    PM: I think HTS is in NLY category also? I have owened both in the past for Div and Cap Gain

  177. 177
    zman Says:

    SSN on the tape saying the $10 mm Niobrara deposit is in their bank account. Also comments that it’s not in an escrow account but in the bank and is only refundable if they can’t deliver 20% of the properties with marketable title.

    More deets in the post tomorrow but that is welcome news.

  178. 178
    BirdsofpreyRcool Says:

    Pack — Lee Cooperman is a star investor (in my Pantheon of Heros). That said, no one is perfect! Frankly, if you just get one or two right, 3 or 4 that don’t hurt you too much, and a couple that blow up, you can do OK. But, that one or two that you get right have to go up multiples, to make up for the couple that blow up.

    Also, I’m not a big believer in a “fully diversified stock portfolio.” Why pay for that? I can just buy an index fund. If you are going to go for a managed fund, go for someone who takes educated risks.

  179. 179
    BirdsofpreyRcool Says:

    I used to think of CHK as a “highly-leveraged black box” too. Some quarters, Aubrey got it right. Some, not so right. Others, dead wrong. There were a couple of years there where you just never knew what he was trading, and whether he made any money at it.

    But, hear ya, on RSO. Frankly, you have to watch everything you hold, carefully, these days… as the mrkt itself is not “buy and hold.”

  180. 180
    BirdsofpreyRcool Says:

    Debt Markets en Fuego… get ’em while they are hot, boys!

    Anadarko Debtors Forgiving Spill in Bond Frenzy: Credit Markets 2010-08-10 01:57:21.140 GMT

    By Tim Catts and Katie Evans
    Aug. 10 (Bloomberg) — Anadarko Petroleum Corp. sold $2 billion of notes that lack creditor protections against claims stemming from the worst oil spill in U.S. history, underscoring how corporations are gaining the upper hand over debt investors.
    Buyers of Anadarko’s seven-year notes will rank lower than winners of damages in lawsuits or settlements arising from the accident and holders of debt backed by the company’s divisions, said Adam Cohen, founder of Covenant Review LLC, a research firm that analyzes corporate bonds’ investor safeguards. Anadarko, based in The Woodlands, Texas, owns a 25 percent stake in the Gulf of Mexico well that BP Plc sealed last week.
    “If you look at the prospectus, you’d never know there was an oil spill,” said Cohen, who is based in New York. “Why would I buy a new issue that I know is going to come behind some uncertain amount of claims over the spill?”
    Companies are taking advantage of borrowing costs near the lowest in six years to issue $51 billion of debt this month, the fastest start to an August on record, according to data compiled by Bloomberg. Anadarko, Ally Financial Inc. and Rite Aid Corp.
    led 12 companies selling $11.7 billion of debt yesterday.
    “With these very, very low Treasury yields combined with a stock market that’s picked itself up off the mat, it’s kind of a best-case scenario for corporate bond demand,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which has $56 billion in assets under management.
    John Christiansen, an Anadarko spokesman, declined to comment.

    Spread to Treasuries

    Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of government debt was unchanged at 175 basis points, or 1.75 percentage points, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows. The gap has narrowed 26 basis points since June 11.
    Average yields fell to 3.654 percent from 3.656 percent.
    The cost of protecting company debt in the U.S. from default fell the most in a week. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, dropped 2.34 basis points to 101.75 basis points as of 6:50 p.m.
    in New York, according to Markit Group Ltd.
    In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined 0.8 basis point to 102.75, Markit prices show.

    Bond Risk

    The Markit iTraxx Japan index fell 1.5 basis points to 106 as of 9:51 a.m. in Tokyo, the lowest level since May 10, Morgan Stanley and CMA prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was little changed at
    114 basis points as of 8:34 a.m. in Hong Kong, according to Credit Agricole CIB.
    The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
    Rite Aid, the third-largest U.S. drugstore chain, sold $650 million of bonds and said in a statement it plans to amend or replace its $1.175 billion revolving credit line due 2012 with a new bank line maturing in 2015.
    The Camp Hill, Pennsylvania-based company, which trails CVS Caremark Corp. and Walgreen Co. in sales, said it obtained
    $1.115 billion in commitments as of Aug. 6 for the new line, which is expected to reduce borrowing costs.

    Rite Aid

    Rite Aid’s 8 percent, 10-year notes sold yesterday yield
    518 basis points more than similar-maturity Treasuries, Bloomberg data show. Its $808.7 million of 9.5 percent notes due
    2017 rose 1.375 cents to 83 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
    Ally, the Detroit-based lender formerly known as GMAC Inc., sold $1.75 billion of 7.5 percent, 10-year notes that yield
    7.625 percent, Bloomberg data show.
    The Standard & Poor’s/LSTA US Leveraged Loan 100 Index rose
    0.06 cent to 89.88 cents on the dollar, the highest since May 19. Loans have returned 4.18 percent this year based on the index, which tracks the 100 largest dollar-denominated first- lien leveraged loans.
    In emerging markets, the extra yield investors demand to own corporate bonds rather than government debt fell to the lowest in more than three months. Spreads narrowed 11 basis points to 258 basis points, the lowest since April 30, according to JPMorgan Chase & Co. index data.

    Fed Program

    Weaker-than-anticipated job growth in July has encouraged speculation in the bond market that the Federal Reserve may provide more stimulus when it meets today, such as by reinvesting proceeds of Treasuries and mortgage securities it holds when they pay down or by buying more.
    The average price of the $5.2 trillion of mortgage bonds guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae reached 106.82 cents on the dollar yesterday, from 106.33 cents on June 23, when Fed officials last met, according to Bank of America Merrill Lynch’s Mortgage Master Index.
    “Will they, or won’t they? That is the question being asked in the market regarding the possibility of the Fed re- starting the asset purchase program,” Walt Schmidt, a mortgage- bond strategist at FTN Financial in Chicago wrote yesterday in a note to clients.
    Bonds from New York-based Citigroup Inc., the bank 18 percent owned by the U.S. government, were the most actively traded U.S. corporate securities yesterday by dealers, with 97 trades of $1 million or more, Bloomberg data show.

    Junk Bonds

    The most active in junk bonds was American International Group Inc., the insurer that turned over a majority stake to the U.S. as part of its bailout, with 58 trades. AIG’s Los Angeles- based plane-leasing business, International Lease Finance Corp., plans to sell as much as $2.5 billion of senior secured notes to repay a portion of outstanding loans from a unit of the insurer, ILFC said yesterday in a statement.
    High-yield, high-risk, or junk, debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P.
    August bond issuance may reach $100 billion, the most on record for the month, according to Scott MacDonald, head of credit and economic research at Stamford, Connecticut-based Aladdin Capital LLC. Sales are the most on record for the first six days of the month since 1999, Bloomberg data show.
    “Companies are taking advantage of a large pool of investor money to pay off higher interest-rate bearing bonds and replace them with lower rates,” MacDonald said in a note to clients on Aug. 6.

    Energy Debt

    Treasury two-year yields fell to the all-time low of 0.4977 percent on Aug. 6. The 10-year note yield was little changed yesterday at 2.82 percent after dropping earlier to 2.80 percent, the lowest level since April 2009.
    Energy companies have sold $8.5 billion of debt this month, accounting for 16.7 percent of issuance, Bloomberg data show.
    Sales of the debt totaled $6 billion in all of last month, or
    6.6 percent of July issuance.
    Anadarko’s 6.375 percent notes sold yesterday yield 415.6 basis points more than Treasuries of similar maturity, Bloomberg data show. The bonds have the same creditor protections as notes that the company sold in March, six weeks before the Deepwater Horizon rig exploded, triggering the spill, according to Covenant Review.
    Anadarko’s $300 million of 6.95 percent notes due in June
    2019 rose 1.188 cent to 103 cents on the dollar, Trace data show. BP’s $3 billion of 5.25 percent notes due 2013 fell 0.04 cent to 104.09 cents.
    “These guys need the dough at some point,” Brady said of Anadarko’s sale. “The market is pretty permissive.

  181. 181
    bill Says:

    bop, thanks for 172

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