18
Aug
Wednesday
Market Sentiment Watch: It was just too boring bearish out there. Today may see a return to the doldrums of summer as there is no economic data to key off of and the news on the tape is decidedly mixed (TGT in line, BJ's lowering its outlook but Deere seeing surging North American sales). Energy land remains quiet before expiry and the first of the Fall conferences next week with only the odd analyst poking his nose into the group's affairs.
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today – The Orange Charts (updated for the Large Caps for 2Q10), VWSYF
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $5,800
- 89% Cash
- Yesterday’s Trades:
- Sold the EOG $95 Calls for 1.11, down 77%. Will stick with the EOG September calls over in the ZIM for now.
ZIM (Zman Inefficient Markets portfolio)
- $5,000
- 46% Cash
- Yesterday’s Trades:
- WLL – Sold the (10) August $90 calls for $2.15, up 42% with the stock at 91.60. I continue to hold the common in the ZLT.
Commodity Watch: Crude oil inched up $0.53 yesterday, $75.77. After the close, the API released an absolutely bearish report (see below) and this morning crude is trading off $0.50 plus in front of the EIA's report.
Natural gas rose $0.04 to close the day at $4.28 yesterday in quiet trading. This morning gas is trading flat.
- Tropics Watch: Comments on the wire about a potential pop up storm in the Gulf but I see nothing worthy of that comment on satellite at the moment. There is still a small cloud pile with a 10% chance of development north of Venezuela.
Early Read On Natural Gas Storage: Street is at 31 BCF for tomorrow’s report. My preliminary estimate is 25 Bcf.
- Last Week: 37 Bcf Injection
- Last Year: 54 Bcf Injection
- 5 Year Average: 60 Bcf Injection
- 10 year Hi: 89 Bcf Injection
- 10 year Low: 22 Bcf Injection
Oil Inventory Preview
API Watch: Gasoline build of the magnitude shown below seems unlikely. We should see one last hurrah for gasoline demand between now and September 1. Normally we see abnormally large draws in gasoline during this time of the year before the last bit of pre school year traveling hits. The premature decline in refinery utilization should only exacerbate the seasonal trend there.
- Crude: UP 5.866 mm barrels
- Gasoline: UP 2.026 mm barrels
- Distillates: UP 2.051 mm barrels
Stuff We Care About Today
The Orange Charts - Large Cap E&P
- Balance sheets on the whole are in a bit better shape than they were at the end of last quarter.
- Spending is up in a few cases but not dramatically.
- Most interesting is NBL where guidance was slightly lowered on the top end due to asset sales but also where spending was reduced from their prior estimate ... we haven't seen a lot of that his year.
- In coming quarters you should see EOG shoot towards a more 50/50 oil/gas profile.
- SWN and ECA remain your "large caps most leveraged to natural gas" and SWN takes the cake for being the least hedged as well. Given the recent fall in SWN, it should more closely play with any swings in gas prices. You can see some of the reasoning behind SWN's decision not to hedge if you skip down to the bottom of the charts and note their low cash costs.
- Sidebar: Noting RMD's comments yesterday on gas and would say that the rate of growth has slowed but that there are still A LOT of natural gas directed rigs turning to the right at the moment, the most in 18 months actually, and so while I think the month end data at the end of August will be highly scrutinized for a role, a combination of higher rig activity and an increase in the the number of frac crews later this year will keep a lid on big rallies in gas prices this year.
- Valuations ... cheap. Not often do we see all of the large caps under 6.0x TEV to EBITDA.
Other Stuff:
Food For Yield Thoughts: I have been getting a lot of requests for yield bearing stuff. I dabble in LINE and WHX as you know but with rates falling as much as they have and expected to fall further, I am suddenly seeing a lot of MSM regarding people bailing on bonds and looking for equity dividends. Helps with my yield stuff as people buy in but also should help things like the S&P 500 Aristocrat Index, which only holds those names in the S&P with a history of dividend increases over the last 25 years. Here's where it gets more interesting. People are thinking that with the "tax cuts" likely coming to an end there will be a number of special dividends prior to year end. We've already seen a few where management owns lots of shares and wants the divie in this tax year. Anyway, just thinking that the herd will glom onto these yield names before year end and then maybe pummel them in the week before New Year's as they the taxable equivalent yield fades. ETFs that come close to matching the Aristocrat are VIG and SDY. You gotta like the ticker of the first one. Anyway, just thinking out loud and understand that there about a dozen of these ETFs to choose from.
Vestas Wind (VWSFY) Get's Wind Knocked Out Of It.
- Missed numbers on lower revenues, higher costs
- Outlook cut on the top and bottom line. Said outlook was trimmed due to order delays shipping to the U.S., Spain, and Germany.
- Hiring will be 3,000 for the year instead of 3,400
- Note however that orders hit a record in 2Q10
- This is the big name in wind so worth watching
Other stuff on my plate:
- GST - tying up lose ends on an updated profile piece
- EGY - ditto
- MCF - officially mulling how much to buy and when. I've always like the story, the BP incident has made it cheaper. Look for a short profile piece here soon but maybe a buy first.
Odds & Ends Analyst Watch:
- WFT - Bernstein upgraded last night to Outperform, target $22.
- LINE - RBC ups target $4 to $34, resumes coverage at Outperform
- RBC also resumed coverage on the rest of upstream MLPs. Upped target on BBEP (my least favorite) by $6 to to $21
August 18th, 2010 at 7:54 amI think q4 will have dda adjustment, exploration expense, and lower production for pipeline issue and qtr might be a loss
This qtr will be better as they are not drilling and producing over 100 mcf a day but with lower ng prices
Wild card might be large dividend to offset bad news in q4 .
Peak was selling 200 k shares a year about 9 or 10 m. He owns 20 % or 3 .m shares. He can get his 9 m with a 3 dollar divy and be taxed at 15 %
Bill – yeah, I want at least a year hold or 25% out of it. Given the BP spill related drop that looks easily doable upon their next success. His most recent presentation does a good job of explaining why they still like the Gulf. Note the rig costs down by half comment. I don't have a feel for a special dividend but all the chatter about special dividends pre end of "Bush tax cuts" makes some degree of sense for other names, like the S&P 500 names that are sitting on a record cash pile.
August 18th, 2010 at 8:00 amMorning all. For the more bullish count we should hold 1084 and ideally 1087 before moving up to 1103 – 1106. The bearish count will not get above yesterdays high. Working in favor of the bullish count are the cycles which indicate more upside into today/tomorrow before consolidating/down into Monday.
August 18th, 2010 at 8:09 amThanks Nicky
August 18th, 2010 at 8:14 amNo BP Spill watch today because no decision has been made, at least it has not been released yet. At this rate, the govt. will decide to resume drilling just in time for the next storm to push them off the well.
August 18th, 2010 at 8:21 amCan't resist… had to look… TED! wow. +18.7 bps. If we drop below +15, that's just TOO tight.
August 18th, 2010 at 8:28 amCredit rallying quite nicely. But, with the C Team at the reigns, will probably just follow stocks.
HeadTrader is very quiet this morning.
That VWSYF opening off 20%
August 18th, 2010 at 8:32 amInteresting conversation with XACS this morning….
August 18th, 2010 at 8:36 amBased on bill's comments, I took a look at SD's bonds. They have a lot of bond issues outstanding. Most of which are not registered (so only insitutionals can own them). Anyway, these bonds, for the most part, are trading around par. Thought I'd take a look at SD's CDS curve… but — shocking !! — there are NO CDS OUTSTANDING for SD. hmmmm….. what does that mean?
XACS something pretty interesting… "companies normally get pushed into the CDS market because bankers are scared about what they hear management talking about behind closed doors."
Wow. Interesting comment, eh? Thing is, it makes sense.
CDS is "insurance" on bonds. At least, that is what it is supposed to be. If you're not worried about your house burning down, you don't load up on insurance. Once you start to worry about something, tho… you buy insurance.
August 18th, 2010 at 8:38 amKeep that in mind, when anybody talks about a company's CDS.
BOP – interesting enough to nibble?
August 18th, 2010 at 8:39 amPathetic opening volumes. NOG and OAS down about all of yesterday's move for instanced, each on less than 10,000 shares. Nobody is playing.
August 18th, 2010 at 8:41 amStory on MLP's with an interview with the CSFB analyst:
http://seekingalpha.com/article/220947-mlps-strong-investment-vehicles-in-uncertain-economic-times
August 18th, 2010 at 8:42 ambill, in case you missed late night post, keep up the good work on SD.
August 18th, 2010 at 8:46 amz — comments i've heard on SD involve concern about the CO2 obligations. Is that conract and plant finalized? Haven't followed SD close enough… but since the bonds are showing any panic, probably worth drilling down into the stock.
August 18th, 2010 at 8:49 amshould read "bonds AREN'T showing any panic…"
August 18th, 2010 at 8:50 amMore on SD bonds… since they are almost exclusively held by institutionals, that means holders own them in fairly large chunks. Those are the type of bonds — once someone gets a case of the nervous nellies — that get CDS written on them. I am just amazed that SD has no CDS. But, that says a lot.
August 18th, 2010 at 8:52 amOf course, if SD CDS do pop up over the next month or two, then i would start to worry…
re 14. With OXY, yes. As I understand it, there is some question of whether or not they will be able to meet their obligations. On the 1Q call I think I remember them reassuring the crowd that they would make it, but don't know re 2Q call. Bill indicated last night they are not going to make enough CO2 for the plant and will therefore incur penalties.
August 18th, 2010 at 8:55 amHome refi demand highest in 15 months. No kidding. At Schwab Bank, the wait time is 50 minutes to talk to their mortgage dept.
August 18th, 2010 at 8:57 amFor big cap yield ETF's, does anyone have better names than SDY and VIG mentioned in the post? Maybe a 2x or 3x ETF along those lines. Also, does anyone know if the Alerian MLP index have the same tax consequences as regular MLP's?
August 18th, 2010 at 9:00 amPenalties are pretty tough on your bottom line… would like to know more about that.
August 18th, 2010 at 9:00 amAlso, building that $100mm Campus is just wrong. It's one of those "red flag" things. When a company puts it's name on a stadium… or builds itself a new headquarters, it's usually the start of a downward slide. Can't TELL you the number of times that red flag has proved to be correct (especially the stadium name….).
Gap filled on MCF
August 18th, 2010 at 9:00 amPickens
August 18th, 2010 at 9:01 amhttp://www.tickerspy.com/newswire/?p=2994
BOP – that flag was definitely correct when CHK did their branch office in Appalachia and the boat racing deal in OKC.
August 18th, 2010 at 9:01 am13. Thanks for your comments rmd, saw them..
August 18th, 2010 at 9:01 amThank you for the New Zealand travel comments. Very helpful. Please add to them also.
August 18th, 2010 at 9:04 amOil inventory stats in 30 minutes.
Noting BALT holding it's recent gains, EGLE still at 5. Still mulling.
August 18th, 2010 at 9:05 amEOG knocked down again but volume is almost non-existent-240000 shares-100 lot shares being traded.
August 18th, 2010 at 9:12 amPenalties: re Century Plant
They are supposed to deliver 3.5 tcf over 30 years thats 117 bcf per year if you use straight line
August 18th, 2010 at 9:16 amWard said they have been delevering co2 already and they have a credit. The operating officer said its more a 2011 issue and estimate 10 m but ward chimed in to say the new plant is more efficient and will save them 30 m per year. So they get more unprofitable 4 dollar methane to offset the 10 m penalty
This years outlook for all their production is 20 bcf a qtr or 80 per year. I think they only have 4 or 5 rigs running to maintain current rate
Its more of an issue for 2012 and beyond
On aside, OXY paying the construction costs but sd is building it and billing oxy, apparently milestone based, as sd is sitting on 46.5 m in unbilled cost.
Thats costing sd 4 . m per year
If sd had its act together, they wouldnt have negoitiated milestones/payments which required them to finance the construction
Bill – happen to know the date of the MCF 4Q release? Should be any day now I would think.
August 18th, 2010 at 9:18 am#23 Yeah… as I recall, the new baseball stadium in Houston didn't say "Enron" for very long….
August 18th, 2010 at 9:20 amOf course, Enron had the double-whammy… putting their name on a stadium AND building a new headquarters at the same time.
August 18th, 2010 at 9:21 amI'm not kidding. Those red flags work.
#19 — MLP ETF's/ETN's/Closed end funds do not typically have the same tax quirks as owning the individual names. You get a 1099 instead of K-1's.
August 18th, 2010 at 9:22 amThe funds do have their own quirks though – some structured as exchange traded notes, closed end funds – some run leverage.
In my opinion they are cleaner at tax time.
Thanks 1520, my tax accountant already barely takes my calls as it is, that would probably help.
August 18th, 2010 at 9:23 am#31-I believe the Board took a lot of heat after the fact.
August 18th, 2010 at 9:25 amlast year mcf reported on 9/14
August 18th, 2010 at 9:25 amThey have 75 days right???
Century Plant
August 18th, 2010 at 9:27 amIf you were OXY and just spent a billion building a plant to get co2 and werent getting it , what would you do?
The economics work better for oxy than sd with current pricing.
MCF FYE = 6/30… don't they have 90 days to report FYE?
August 18th, 2010 at 9:28 am#33 – there are now several funds to pick from in the MLP universe – it used to be just the closed end funds. admittedly i don't know the newer funds as well but they all own the same top 5-6 positions. Kinder Morgan, Enterprise, Enbridge, Magellan, Plains, Energy Transfer Ptnrs.
August 18th, 2010 at 9:28 amre 35, yes right, not on a calendar quarter so this is their year end.
August 18th, 2010 at 9:28 amMake that 28.75 mm newly minted KOG shares as the shoe was exercised, bringing the new FD share count to 149mm. Adds $74.1 mm to cash (net of fees) and takes TEV to $343mm
August 18th, 2010 at 9:29 amchoices #34 — not enough heat, apparently… Enron… that was one Spectacular Blow Up.
August 18th, 2010 at 9:30 amEIA Oil Report:
Inventories:
Crude: down 0.8 mm barrels on slight up imports
Gasoline: gasoline unchanged
Distillates: up 1.1 mm barrels
…
August 18th, 2010 at 9:31 amMore EIA
Gasoline demand jumped back up as expected to 9.459 mm bpd
Distillate demand bounced too but still at bottom of range there.
Stocks at Cushing fell 0.7 mm barrels to 37.0 which is good for crude.
All in all, not a bad report, nothing like API last night.
:
August 18th, 2010 at 9:33 amCrude was off about $1.70 at $74 before the report
August 18th, 2010 at 9:33 amUtilization came back up 90% last week after the premature dip in the prior week, so this draw is a good quality draw (not driven by imports) as refinery throughput rose by almost 200,000 bopd even as imports were up about 100,000.
August 18th, 2010 at 9:36 amre sd & oxy
August 18th, 2010 at 9:42 amHere is an interesting presentartion by oxy
Shows the importance of co2 for their permian oil production 100 bcf of co2 = 20 m barrels of oil
They need 5 tcf of co2 to get the next 1 billion bbls of oil
http://www.oxy.com/Investor_Relations/Documents/Albrecht%20printout%20Oxy%202010%20Analyst%20Meeting.pdf
They have 100 % margins with 75 dollar oil
actual margin of roughly 50 %on sales
August 18th, 2010 at 9:43 am37 yes 90 days ..thats right they usually report mid sept
August 18th, 2010 at 9:45 amCrude continues to crater; I thought the DOE wasn't so bad?
August 18th, 2010 at 9:51 amInteresting to see WLL going green here.
Crude up 50 cents on the oil report, I continue to think we are due for a range bound spell in the $70s.
On KOG, that new share count puts them at about $0.60 per share of cash and pre paid expenses. The rest of the valuation can go to acreage and reserves.
Reserves at last year were 4.485 mm BOE but that should be up a couple of million barrels this year due to drilling, that may be conservative.
If you call that 6.5 mm BOE and put $15/ barrel on it that's another $0.65 per share so we're up to $1.25 of value.
If you put $4,000 / ac on both their east and west of Nesson acreage and give them $100 / ac on the stuff in Wyoming and add it to the above you get their current stock price.
August 18th, 2010 at 9:53 amJat – it rolled back over with the S&P just now but really it is where it was before the report, maybe a dime low. The report was not bad, especially compared to the API which is what sent it lower in the first place. Good to see Cushing come off but it probably won't last. Looking for imports to have peaked for the year now and to decline as we enter fall. I think below $70 with a re-weakened dollar in mind, you see OPEC actually do something at their meeting next month.
August 18th, 2010 at 9:55 amI am surprised to see oil continuing to be see weak. That data did not look bad. Is it expiry today? Wondering if that is having an effect.
August 18th, 2010 at 10:02 amBill – wildcard for MCF year end would be: did the recent negative revision at Mary Rose and Dutch take enough reserves into account or not. My sense is that there will not be a further negative revision based on a barrels in the ground estimate. There will be no new offshore wells to report on as they don't plan to spud another well until at least November (thank you Mr. President). Onshore, they could talk about the Rexer, not sure what that one is other than a cheapish S. Texas exploration well.
August 18th, 2010 at 10:02 amEOG getting a complete beatdown today…. volume seems pretty good. Just a relentless push down; very little options or put volume
August 18th, 2010 at 10:02 amNicky – last day for Sept crude contract to trade is Aug 20
August 18th, 2010 at 10:04 amPack – yeah, I'll be adding to September positions soon.
BP – No news from the govt. is bad news for the name.
And Nicky, I sort of think oil being flat to post numbers is more a function of malaise than anything else. A team in Hampton deliberately with phones on mute.
August 18th, 2010 at 10:07 amSD: I seem to remember on past conf. calls mgt saying they had the CO2 under control and noo problemo. Corporate strategy has been FUBAR since the IPO.
August 18th, 2010 at 10:08 amWildZtrade – ZIM – EOG
EOG – Added (20) August $95 calls for $0.39 with the stock down another 3%. High risk/potential trade as this seems overdone, on light volume.
August 18th, 2010 at 10:11 amZ: EOG has had an unusual amount of earnings adjustments lower over the last 3 months. Do you think that has been the reaction to their lumpiness comment?
August 18th, 2010 at 10:11 amEOG: Ticonderoga's initiation worries about EOG's premium valuation overlooking the cost of achieving growth targets; thought debt doubled by yr.end '11.
August 18th, 2010 at 10:12 amRMD – Oh it worked fine until gas prices peaked and rolled over … then FUBAR became SNAFU
August 18th, 2010 at 10:12 amTom – probably but the comment was made in prior quarters. If you batch drill a bunch of wells in a quarter and batch complete them as well in that quarter then you don't see the oil until subsequent quarters. I have been actively modeling these guys since the late 1990s. One camp they are not is is the over promise and under-deliver camp. Re debt doubling, that simply is not at all their style either.
August 18th, 2010 at 10:16 amwhat would ye ng inventories have to be to be considered "bullish"
August 18th, 2010 at 10:16 amwould 3750 do it?
>did the recent negative revision at Mary Rose and Dutch take enough reserves into account or not. My sense is that there will not be a further negative revision based on a barrels in the ground estimate.
August 18th, 2010 at 10:19 amId be shocked if it went lower. They never declared what nautilus 263 was
Bill – in the old days I would have said sub 3 T's. This year I would say that 3.75 would be supportive of gas, not really bullish. I think the bullish angle comes from supply rolling over. Something short of that level in storage would be fleetingly bullish. Note how fast gas retreated as the heat started to lose its hold. With 2+ Bcfpgd more supply vs just last year at present (my estimate) you are going to pack gas into storage in the should at a very good clip. Thankfully, LNG loads which should be at a record if you listened last year to the folks over at LNG (the company) are actually at their lows, busy going to different parts of Asia where gas is getting better prices. Europe also has been helping with that demand. And Canada has eaten away at it's own sotrage surplus keeping their numbers headed south lowish. But without a storm to knock out some Gomex production for a time this year, my sense is that we get to your level +/-150 Bcf depending on the weather and that gas goes into year end on cold but not really cold weather at around $5.
August 18th, 2010 at 10:24 amre 64. Judging Peak, and I don't know the guy but have read his stuff and listened to him for quite awhile now, I'd say he had that reserve company of theirs take the low end or be as conservative as possible with the hit so they don't have to do it again. Like that they immediately went "no bonus, no options" on that. That is how you treat your shareholders. Did notice that re Nautilus, would think it would be a 10 to 15 Bcf type well gross. Any idea what Rexer is targeting? Think that's in Lavaca county.
August 18th, 2010 at 10:31 amOil at 74.87, about a buck off the lows now.
WLT = onward and upward.
August 18th, 2010 at 10:42 amAnother Red Flag: Receiving a Nobel when only in office for a few months!
August 18th, 2010 at 10:44 amapbd
re 68 = Thanks for the chuckle.
August 18th, 2010 at 10:45 amBOP…did you get a shipping confirmation from CIGX?
August 18th, 2010 at 10:48 amRedjack — NOOOOOOOOOO.
August 18th, 2010 at 10:55 amExpecting the shipment today or tomorrow, based on Bob's comments. Will rattle the cage if I don't see product on my doorstep by tomorrow afternoon.
Bob's Cage Rattling was very impressive, by the way. Well done! Went right to the Point Source.
apbd — #68 occupies a "special category" all it's own. Not sure we see that "red flag" again….
August 18th, 2010 at 10:57 ambut it's a Crazy World out there, for sure!
BOP – If you have anything to add to my back of the envelope comments on KOG above please do.
August 18th, 2010 at 10:57 amLittle fact… more CEO's are named "Bob" (or Robert) than any other name.
August 18th, 2010 at 10:58 amGuess Bobs know how to "get the job done," eh? 🙂
z — saw your KOG comments. Agree with them. But still pondering the situation there (as I still own a few shares)…
August 18th, 2010 at 11:00 am"BOp…I rec'd mine last night…it reads like it came from a 5th grader:
"
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Thank you for your recent Cigrx order. Your order ROCK00001130 has been shipped. Please expect to receive it in 7-10 days, unless your order was being rushed to you in which case you will receive it sooner."
August 18th, 2010 at 11:00 amonce again:
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Thank you for your recent Cigrx order. Your order ROCK00001130 has been shipped. Please expect to receive it in 7-10 days, unless your order was being rushed to you in which case you will receive it sooner
August 18th, 2010 at 11:00 amBOP – you can email
August 18th, 2010 at 11:02 amSara Troy Machir
Vice President, Communications & Investor Relations
at smachir@starscientific.com
I got my confirmation email shortly after "rattling her cage"
thanks for that, redjack.
August 18th, 2010 at 11:05 amIn all honesty, I think marketing firms these days word everything that is directed at the public in terms a 5th grader would understand. Move to any higher level (like, for example, 8th grade) and you lose a large part of the U.S. population. Sad beyond words… but it is, what it is.
The average IQ on this board is Oceans-Eleven-Away from the average IQ of the Purchasing Public. Tough nut to chew on, sometimes.
Thank you, Bob. I think I will let the process play out… I want to know how they treat the average person and will report back.
August 18th, 2010 at 11:10 amStar management did, however, get an earful of our comments from the board. They are not unaware of the situation. Still… wow. There were some bush-league mistakes by some highly-compensated (and supposedly seasoned) players here.
Bob — to follow on… I will contact Ms. Sara when I get my order. So, thanks again for your help on this.
August 18th, 2010 at 11:13 amAll other Star-Players should do the same. Feedback is helpful, as we are just at the start of this game.
Z – I've been out of it for a while. Why is EOG down here ?
August 18th, 2010 at 11:15 amZMAN, RE 50, is KOG then fully valued with their challenges of getting crews for production?
August 18th, 2010 at 11:22 amD – Simply put, they missed on EPS due to lumpy production and they raised their capital budget. They are down about 10% since then. They also announced a number of good things like a new oil shale play for them and the continued successful westward expansion of the Bakken lite into Montana.
August 18th, 2010 at 11:31 amRe 83. Trying to decide that. If you put $5,000/acre on the numbers then no or if reserve replacement is better than I expect then no. I'm going to put some BOE math on the site tomorrow with them vs NOG, OAS and maybe another name. I don't plan to sit on it long. Either going to add or punt soon.
August 18th, 2010 at 11:33 amThe return of "SUNSHINE" to the board.
August 18th, 2010 at 11:34 amWhat does that mean????
you feeling perky today, ram? 🙂
Grabbing a quick bite, back in a bit.
August 18th, 2010 at 11:36 amKOG — the large holders participated in the 2ndary. But i think most of the large holders also trade their position. Institutionals (who aren't HFs) don't usually trade their positions, in my experience. So this is just another reason why KOG is probably a trading vehicle now (and not a buy-and-fuggitaboudit position).
August 18th, 2010 at 11:37 amBOP: CEO of EGY is Robert 'Bobby' Gerry….is that a good sign?????
August 18th, 2010 at 11:44 amIncidentally, had a follow-up with Vaalco yesterday, and they will be drilling a 4th well in the Ebuori field [next year subject to partner approval]….It turns out the Gamba Sands there are thicker and they will need a 4th well to develop the field EUR. The production platform only has 3 slots (all currently used), but they can do a bolt-on and add a fourth slot. Stres analysis has already been complpeted and they material ordered.
One item which did not make sense during the Q2 CC was that the Ebouri field current production was only 7,400 b/d (no water cut). Based on previous statements by Vaalco (with three wells operating it should have been producing sligthly over 9,000 b/d. Was advised they are having electrical issues on the platform:
1) they have two generators and are having period problems with both of them…………they have someone from the supplier to fix this yet this month.
2) they have a switchgear problem………..and did not pu enough switchgear capacity on the platform to handle 6 submersible pumps simultaneously (two for each well)……..this issue won't be resolved until late in Q4. so late in Q4 they will get a 2,600 b/d upward bump in production…………..irrespective of what happens with Etame-7H development well (supposed to add 3,200 b/d net ) and South Tchibala Development welll (supposed to add about 2,000 b/d).
The above total out to a net increase of 7,800 b/d addition to daily production…………..which gets them above 25,000 b/d even allowing for well declines ………25,000 b/d of oil is the current FPSO limit [it can process 35,000 b/d fluids but only 25,000 b/d oil unless and until it is modified.
Was advised partners are 'PRESSING' Vaalco to suck hard on all the straws in the various reservoirs………..but Vaalco wants to maximize EUR's. Per Bobby, the estimate they have produced about 50% of the current reservoir potential in the Etame concession (total production to date is sligly over 53 milion barrles). Historically, some of the Etame consourtium PSA partners have drug their feet ………..not so now…they all want to 'PUMP BABY BUMP & DRILL BABY DRILL'.
Of course all the events in Gabon (on-shore and offshore) are merely prelim's to the upcoming events in Angola Block 5………..but it adds cashflow to the already existing $97 million cash- in the bank (includes escrow for Angola).
recall when ard had production problems when in gets hot in texas
Producer Reports East Texas Shut-Ins Due to Plant Outage
Processing facility may be down through the end of September
August 18th, 2010 at 11:53 amI cant see who it is
Any guesses
who is in east texas swn??
i found it
August 18th, 2010 at 11:54 ameroc
http://www.stockmarketsreview.com/news/32266/
Back, re 90/91. SWN would be very small. Eroc should be very small as well. ECA, APC, EOG would have been bigger names there depending on how ar each. But eroc = no impact on market.
August 18th, 2010 at 12:08 pmcrys — Bobby seems to be ok (being a "Bob"… and in SPITE of having been a banker). Kinda cool that he still goes by "Bobby," actually. As he is no Spring Chicken.
August 18th, 2010 at 12:10 pmThank you for your detailed follow-up report on EGY. Good catch on that electrical issue. Gotta say, however, the Gamba is one sweet reservoir. But I don't see any reason to try to run all out there… taxes and additional capital requirements are constraints. Which is why I think finding ANYthing in the OnShore Concession would just be so huge. Plus, partner Total already has some infrastructure nearby-ish.
So, at $5.75… buy, sell, or just hold onto current shares? I'm leaning toward adding… but want to do that on a down day. Maybe the stock drops to $5.50 again.
BALT making a move towards a breakout. Nice call there Bill. I still have not done the homework that would let me get long.
August 18th, 2010 at 12:11 pmThis is more like it. Still looking for the 1103 – 1106 area by tomorrow.
August 18th, 2010 at 12:16 pmBill,
August 18th, 2010 at 12:21 pmConcur with Z on your BALT call………..voted last week, and got in near (but not the bottom).
APC pressure probably undue today… attributable to their partner off Ghana, Kosmos, not being able to sell their stake in Jubilee to Exxon, due to government objection. Great name, interesting chart, and will probably be in court with BP for years.
August 18th, 2010 at 12:24 pmWeather Underground Guru says Atlantic Hurricanes about to pick-up…interesting analysis:
August 18th, 2010 at 12:28 pmhttp://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=1579
BOP's favorite guy, Barney Frank, saying we should abolish Fannie and Freddie. For once I agree with him. Guessing that would mean much higher mortgage rates.
August 18th, 2010 at 12:29 pmBarney Frank is not stupid. He just sounds like Elmer Fudd. Sometimes he says the right things. Much more often he does the wrong things.
August 18th, 2010 at 12:42 pmThe govt takeover of wide swaths of the economy (in the name of a "crisis") was NOT the right thing. Stealing from rightful owners in the "auto-bailout" was NOT the right thing. Barney spewed some great rhetoric, in support of all that sh*t. But, Barney is not stupid.
Ken Salazar, on the other hand…
Oil only off a quarter now
August 18th, 2010 at 12:44 pmQuestion in with SSN for about 4 days now regarding whether or not the lack of creation of an exploration unit bulloxes up the potential for the high end of the deal range or not remains unanswered by them. Their presentation next week at Enercom should contain data on the deal so we will know if the top end of the range is no longer the target. In the last presentation they said they expected to get the top end of the range. $10 mm difference is not that big a deal but takes my valuation to around $1.40, away from the top end of the range closer to $1.75.
August 18th, 2010 at 12:50 pmECT Conference Call @PM ET Today:
http://phx.corporate-ir.net/phoenix.zhtml?c=235934&p=irol-eventPopUpDisclaimer&pp=IROL-BasicWebCast&EventId=3278848&WebCastId=1031301&StreamId=1544138&mp=IROL-EventDetails&PlayerPlatform=1&TIK={4f625687-8eaf-454c-b795-cc93d43f7426}&RGS=3
I like their distribution projections :
Subordination Target Incentive
Threshold Distribution Threshold
(per unit) (per unit) (per unit)
2010:
Second Quarter $ 0.181 $ 0.227 $ 0.272
Third Quarter 0.334 0.417 0.501
Fourth Quarter 0.478 0.597 0.716
2011:
First Quarter 0.446 0.558 0.669
Second Quarter 0.451 0.564 0.676
Third Quarter 0.550 0.688 0.825
Fourth Quarter 0.565 0.706 0.847
2012:
First Quarter 0.574 0.717 0.861
Second Quarter 0.602 0.752 0.903
Third Quarter 0.624 0.780 0.937
Fourth Quarter 0.701 0.876 1.051
2013:
First Quarter 0.756 0.945 1.135
Second Quarter 0.754 0.942 1.131
Third Quarter 0.701 0.876 1.052
Fourth Quarter 0.659 0.824 0.989
2014:
First Quarter 0.610 0.763 0.915
Second Quarter 0.589 0.736 0.883
Third Quarter 0.571 0.713 0.856
Fourth Quarter 0.549 0.687 0.824
2015:
First Quarter 0.519 0.649 0.779
August 18th, 2010 at 12:58 pm2PM
August 18th, 2010 at 12:58 pmOK, just noticed TPH rolled halfway out on coal with a modestly positive report on the sector today. Calling for flat prices going forward. Tomorrow they roll out on the names but it sounds like the Met-coal leveraged will get the best recommendations (WLT, ANR (a Simmons favorite), PCX ). They also like PRB coal (the low btu but clean stuff) which would put BTU in their sites for a Buy rec.
August 18th, 2010 at 1:00 pmThanks BOB – forgot that was today. So far no move by them, do want to listen, link not working for me.
August 18th, 2010 at 1:03 pmGot on the ECT call
August 18th, 2010 at 1:11 pmECT
Production is exceeding expectations.
Regulatory issues: only 1 other operator out of 25 in the Marcellus has a better safety / environmental record than ECA
Rumor is that a severance tax will be enacted of 5% during the 4th quarter.
…
August 18th, 2010 at 1:13 pmECT cc: 14 producing wells, 5 more completed, 6 partially drilled, avg lateral 3,606 feet. 17 additional permitted
August 18th, 2010 at 1:14 pmECT
Q&A – wow 2 questions, both asked by kids with zits. did not even know what questions to ask.
Plans to drill longer laterals than they are now, will look at longer wells, up to and beyond 3,500 feet.
Commenting that the expensive part of the well is getting down 8,000 feet, so moving from 2,500 to 3,500 foot laterals makes sense.
August 18th, 2010 at 1:16 pmBob – green light for better than expected results next couple of quarters. Call was so short and I missed the beginning. Did they go over the incentive structure vs actual results? so 19 wells on by quarter end, is two higher than plan.
August 18th, 2010 at 1:19 pmThey mentioned that production was 40% higher than planned. The incentive is capped at 20%, therefore the 0.272 distribution vs 0.227 target. Said the NG price price received was exactly as planned for last qtr
August 18th, 2010 at 1:23 pmECT said pipeline infrastructure for all current and future wells will be completed by Sept
August 18th, 2010 at 1:25 pmBob – thinking that if people do make a natural gas bet with a trust, this one is going to make good sense to them, as they will benefit from the combination of premium to NYMEX gas pricing and the sub $1 operating costs. Going to relisten to the call when it is available. Market not paying any attention to this kind of stuff today.
August 18th, 2010 at 1:28 pmCFO words: "The operating costs are well, well below $1"
August 18th, 2010 at 1:30 pmBob – this is from my post last week. Do you think I got the part about subordination correct? I'm still not sure I've got my arms around what the yield will be going forward on their model. I built a model by the way and 4Q10 and 1Q11 point to some significantly large distributions. They have some nice swaps in place at $6.75.
- Conference call here middle of next week, will report back with anything interesting … especially since next week should prove to be very slow. I've built a simple model here and will likely publish it after the call.
August 18th, 2010 at 1:34 pmIs ECT structured like LINE or WHX?
August 18th, 2010 at 1:35 pm
August 18th, 2010 at 1:36 pmIt's a trust but it has some different features. Listening to the replay now.
August 18th, 2010 at 1:37 pmThis is a totally off-topic technical (engineering) question… but working on something that I could use a little help with.
August 18th, 2010 at 1:44 pmIf one was to drill a well in the NE of the US (basically, into bedrock), what would one expect the bottom hole temperature to be at 5,000, 10,000, and 20,000 ft?
I'll relay that to Wyoming but if it helps, I bet it would be hot enough to boil water, lol.
August 18th, 2010 at 1:45 pmz — you just snagged the top place odds for winning the "Number ONE Biggest UNDERSTATEMENT of the Year."
August 18th, 2010 at 1:46 pmI try
August 18th, 2010 at 1:48 pmECT – this will be a bit redundant to the above
20% above plan on the distribution due to better than expected production
2 drilling rigs , 1 to drill the verticals, and then a larger well to drill the laterals
Drilling results
4.22 net wells completed in addition to the 14 wells on now.
Trust gets 5.46 net wells credit due to the longer than expected lateral.
Need a flow chart on the how they get credit for wells
3 of the 5 wells will be on in September with the 2 others in October
AC Nielson pipe completed in September, no delays anticipated for production.
In the quarter they only had 7 wells on instead of the 8 as per plan. This was due to production being above plan from the 7, more than the gathering system could handle, (1 well on a 3 well pad was basically unable to produce into the line). Production from these 7 wells was 43% above the plan for 8 wells.
Current Production is 21 MMcfgpd.
I don't have production that high two quarters from now.
August 18th, 2010 at 1:53 pm116: The prospectus has target distributions for each quarter through March, 2032. They only spell ot the subordinated and incentive thresholds through 2015, but the sub is 20% under the target and the incentive is 20% over the target. The target distribution for 2013 is $3.59, or 18% at the $20 IPO
August 18th, 2010 at 1:53 pmYou thinking geothermal, BOP?
August 18th, 2010 at 1:56 pmBOB – right, I read that too. So as I understand it, they get the incentive level if they beat target by 20%?
August 18th, 2010 at 1:57 pmZ- that is what i got out of it (from an amateur perspective)
August 18th, 2010 at 2:01 pmWLT – Betting TPH comes with a Buy in the morning there and at ANR and BTU. Not sure they are big enough to really move the needle on the names and they are a bit late to the party in terms of tracking coal. However, the coals have pulled back significantly from highs earlier this year while coal really hasn't . And you have to initiate some time. WLT trying to break. High risk play would be to tap the August $80s. I'm not going to do that for now (we also get payrolls and other data tomorrow). I continue to hold the WLT common.
August 18th, 2010 at 2:01 pmre 128 – Well that's just massive.
August 18th, 2010 at 2:05 pmcargo — 126 yes.
August 18th, 2010 at 2:10 pminvolved with some cutting edge stuff… just mind-blowing, really. But, think some of the parameters and claims being made just look bizarre to me.
BOP – it's a red flag if the guy does air quotes with his fingers while saying the word "LASERS"
August 18th, 2010 at 2:12 pmooooo… one of my FAVE movie lines… "sharks with frickin' LASER BEAMS attached to their heads" bwwwwaaahh haaa haaaa.
August 18th, 2010 at 2:25 pmBP says it's selling its Tuscaloosa trend onshore LA stuff.
Also says it is prepping the well to drill ahead.
August 18th, 2010 at 2:27 pmJust reading the ECT Q at the moment. It doesn't look like I had that right above about the incentive comment.
August 18th, 2010 at 2:39 pmBob – it looks to be like the incentive threshold is the max distribution but have sent the question into a guy who used to work on this stuff regularly.
Ram – LINE and WHX does not have this type of subordinated/target/incentive format. Just want to make sure I understand exactly what's what here. The model otherwise points to some nice distributions.
August 18th, 2010 at 2:54 pmbeerthirty
August 18th, 2010 at 3:01 pmBOP – #120 got an email to one of my frac experts in PA. I'll have your answer as fast as you can say "bwwwwaaahh haaa haaaa"!.
August 18th, 2010 at 3:07 pmThanks. I can't get a handle on the different E&P yielders. Is there a way to spreadsheet what you have talked about and possible advantages and disadvantages. I hope you can put them in your posts above the comments. Shame on anyone who doesn't take the time to read the posts, such valuable information – not advice.
August 18th, 2010 at 3:12 pmRe 139. Absolutely correct … not advice.
August 18th, 2010 at 3:16 pmBob, Ram, all, – got the ECT deal sorted. They get the distribution, up to the incentive level on good results. Over that and ECA starts taking half. So it's not capped at that level, it is just slowed. Will work the new numbers through the model. Probably falls into the 13+% yield camp.
August 18th, 2010 at 3:29 pmGeno — thanks much-o, sir!!
August 18th, 2010 at 3:39 pmOff to soccer, the emailbag is kind of empty so if you have anything send it along.
August 18th, 2010 at 4:08 pmMore potential bad news for SD (and maybe good).
August 18th, 2010 at 5:14 pmStanley Druckenmiller saying he was tired of the stress of managing money for others and frustrated by his failure in the past three years to match returns of previous years is throwing in the towel at Duquesne Capital and closing his legendary shop early next year. Among his new positions are about 1.5 shares of SD which positions him as the 25th largest institutional holder. Sport on the Street is to shoot at the positions of a fund in liquidation. With this one, I bet he defends it.
I also note that Oamha's other Buffett, Wally Weitz decided to start a small inital position at a little over 4.5 million shares which makes Wally the 7th largest institutional holder. For those unfamilar, Wally is part of the deep value, private market valuation (and if I'm wrong I'll just buy more and more and get loud) gang. I've watched he and his running buddies Mason Hawkins (Southeastern Asset), Ian Cummings (lLUK) and yes Buffett all get together finance their holdings out of the toilet plenty of times in the past. WMB and LVLT come to mind.
And, as mentioned yesterday, Fairfax Financial is already there with about 4 million shares of common and thats before all the converts of which SD is a serial issuer and of which Fairfax has been a serial buyer.
T Ward may not like the terms when and if he comes calling for a rescue, but rescue team is slowly showing up and on that note I'm going to inventory a little more just for drill (or maybe to get drilled?).
elijah — good poop. Great musings. Thank you for sharing!
August 18th, 2010 at 6:05 pmCouple of names that are looking technically good…WLL, NOG, ESV, WLT, EXXI, SSN, HAL
August 18th, 2010 at 6:25 pmZMAN, thanks. JB, what do you see in EOG’s near future – please?
August 18th, 2010 at 9:29 pmSD…..From a shark's perspective… First SD has actually done what they had to do,become OILY. To accomplish this task they also had to take on a huge amount of debt. The "smart'" money has being beating them up with a huge amount of success . This has lead to more beating and more weakness and the cycle continues………Now survival mode kicks in and non-essential assets are put up for sale, i.e. recent presentation…………Bone Springs / Avalon acreage probably goes for at least $ 4k/ac, but probably more, with about 40k ac so 160 to 250 mil……..Strawberry (Sprayberry, Dean, Wolfcamp, Strawn) with 20k ac with some in the heart of the play on Midland / Upton County line, 80 to 120 mil and anything else they have that isn't in the WTO or Central Basin Uplift area. So maybe 240 to 400 million $ … Respectable but probably not enough to keep the the wolves at bay long………………. So a JV on their WTO acreage…..SD is resisting this at all cost because they know that this asset is much greater than any present number and probably one of the top 10 gas fields in the lower 48 states. This asset of 550,000 contigous acres is easily worth $ 5 / share and with recovery in the price of natural gas to $6/mcf probably more than $ 10/share. It is on the table but probably in the current enviroment no one willing to match SD's internal model price. Most suitors would see SD as weak and probably low ball and wait. WTO is seen as dead money at least at current prices………………..So your reading along here and your saying where is this going…………………Thesis: The Permian Basin (PB) is the among the hottest basins in the US with over $ 6 billion in deals in the last month including the SD/ARD deal, companies need to get oily , the PB is an older legacy area and vast amounts of the acreage are hbp, most ARD shareholders would like to see a change in Management and reversal in share price direction, quality assets are in demand, new completion techniques are making many additional formations economically viable and this should continue to accelerate into the future……………………….Plan: Buying the common , no options , no margin which gives you unlimited time for the play to materialize…..DVN recently lost out on the Marbob deal to CXO and has being acquring Delaware Basin ( Bone Springs and Avalon) acreage aggressively. They are the prime company , especially in their aggressive move to get oily, to acquire SD outright. If a hostile bid was made for the company , we can expect other companies to participate as well. If APA were to acquire SD along with their recent BP and Mariner acquistions , they would have one of the premier portfolios of properties in the PB comparable to OXY or possibly better. APC is also aggressively pursuing large acreage tracts and has recently made several large purchases in Lea and Eddy Counties in New Mexico. The Leonard/ Avalon shale is all the buzz and underlies almost the entire basin and is said to have the potentional to be as productive as any shale play in the US with new completion techniques and horizontal drilling. We are still early in this play , but EOG is saying they have 65mmboe potentional from just 35k acres. Anticipation goes a long way…………………………..Bottom line , looking for SD to get taken out for at least $ 7.00 / share, which would be steal………You can take this Thesis and $ 5.00 and buy yourself a cup of coffee………………..Do not trade this stock if you cannot stand extreme swings in price and have a long term prespective for the trade to work out………..I am long the stock.
August 19th, 2010 at 1:57 amRe: #147, ram…EOG, nice "tweezer" candle formation holding support at $92 on the daily , near term, if the mkt rallies I can see EOG three box reversing to $95, then testing 200 day SMA resistance at $98, $92 is the support level to watch, near term…
August 19th, 2010 at 5:25 amNM OUT
August 19th, 2010 at 7:15 amhttp://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzkzNzIzfENoaWxkSUQ9Mzk4OTI4fFR5cGU9MQ==&t=1
GOOD NUMBERS UP 5 % PRE MARKET
HEARD SD CAUGHT ANOTHER DOWNGRADE
Thanks West, JB, bill, Thursday post is up
August 19th, 2010 at 7:42 am