Market Sentiment Watch: Potential buyers are more than a little leery of participating before the week's important economic data and probably before Labor Day to any great extent. After a number of negative days, futures are again called sharply lower today. Not much of a concern for the ZLT and the option portfolios are running cash heavy at the moment and I am content to wait out more rational days (with more people at their desks and trading) before committing to the market.
Ecodata Watch:
- We get existing home sales at 10 am EST, (F = 4.78 mm, last 5.37 mm)
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today – Enercom wraps, Enercom schedule for the day, SM, AXAS
- Odds & Ends
Holdings Watch:
- ZCAT (Zman Catalyst portfolio):
- $5,200
- 100% Cash
- Yesterday’s Trades:
- None
- ZIM (Zman Inefficient Markets portfolio)
- $3,300
- 57% Cash
- Yesterday’s Trades:
- None
Commodity Watch
Crude oil fell $0.72 to close at $73.10 yesterday in sluggish trading that looked like simple follow on action to last week's slide. This morning crude is trading off another 1%.
- Early Read On Oil Inventories:
- Crude: Up 800,000 barrels
- Gasoline: Down 200,000 barrels
Natural gas fell $0.05 to close at $4.07 yesterday, falling with the mercury and with news that tropical action was bending away from the infrastructure laden Gulf of Mexico. This morning gas is trading flat.
- Tropics Watch: Danielle looking more and more like an Atlantic fish storm, not even contacting the east coast. A second batch of clouds off Africa quickly spun up into another organized low and is given a 90% chance of becoming a named storm in the near future.
Stuff We Care About Today
Thoughts from Enercom... (my cleaned up and augmented notes from yesterday's more interesting presentations)
CLB thoughts: onward and upward
- Macro Stuff: CEO's Peak Oil Comments
- World plateaued at 88 mm bopd of supply.
- Demand is now at about 86 mm bopd.
- Says they don’t see a lot of big new oil fields left to discover.
- These guys are in a good position to make statements like that as they do reservoir monitoring and enhancement all over the world (they are in 1,050 of the big 4,000 fields on the planet).
- Company specific:
- Nothing really new, stock continues to perform, pay dividends, as demand for their services continues to grow globally.
- JB chart read: CLB, on a P&F buy signal in X’s, currently consolidating into a triangle, the most relevant support is the 50 day SMA at $77.37, this falls right at lower lower triangle trendline support, $80 has been tough resistance as of late…
Dawson (DWSN): interesting lagging stock, financials have turned, moving higher.
- Back in 2007/08, they were probably 95% focused on gathering seismic on gas plays. Now they are closer to evenly balanced.
- Seeing continued 3D in the Eagle Ford and increased activity in the Haynesville and Niobrara.
- Company Specific
- Revenue trend has been "depressing" of late
- But they are lagging indicator and they are seeing increasing demand everywhere during 2Q and 3Q10
- Margins are up last two quarters.
VQ - Worth finding room for on the near term things to do list.
- Pure California oil and gas play.
- Biggest gas producer in northern California
- SAC basin natural gas, one of the most economic gas plays in the country and get premium nat gas prices there (about $0.30 premium to NYMEX)
- “we think low gas prices for years to come"
- They get a 25% IRR on $3.50 equivalent NYMEX in the Sacramento Basin. Going to slow down a bit next year after drilling 100 wells this year and 250 recompletions.
- Strong natural gas hedge position
- Real story here is the Monterey Shale: (they are in 3 basins in the play)
3 billion barrels already found by industry in the play.
They have lots of data on it in the form of logs, little core data yet
Average cumulative production of 5 mm barrels per well
- Real story here is the Monterey Shale: (they are in 3 basins in the play)
- 158,000 acres onshore now, goal to get to 300,000 net acres by end of 2011.
- “Probably the riches shale play in the country” in terms of OOIP.
- If so great, why hasn’t it all been snapped up?
- The majors control 77 to 78% of CA production, and have been focused on shallow heavy oil fields. They had no incentive to drill anything deeper as the heavy oil stuff was cheap top produce.
- VQ – most levered company to the Monterey.
WLL - Best presentation of the day ... Stock ended the day off 1%.
- Whiting just became second largest oil producer in North Dakota. - Their 2P reserves are 3rd party engineered at 2x their proved reserves. Reserves primarily located in Parshall and Sanish fields and their 2 EOR projects in TX and OK.
- $830 mm budget … they did not commit the cardinal sin of the second quarter of raising their budget as they raised their production guidance.
- 80% of budget goes to areas that produce 94% of their production
- 45% of budget directed toward finding new reserves
- Acreage – they reeled off 4 project names that they won’t tell where they are but that they have the same rock properties as what they like at Sanish/Parshal/Lewis & Clark.
- They have been getting off 98% of their fracs, talking about 750 foot frac wings on either side of the wellbore, didn’t realize they had gotten that far out.
- Takeaway capacity had been an issue, no longer, Enbridge line taking all the production that WLL wants to give them, think abut 90% of their production will be carried away by pipeline by October, saves on differential.
-
-
- Lewis and Clark – 60 miles SW of Sanish, 220,000 net acres setting up 550 locations, 3 wells drilling now, 3 wells completing now, hope to have results by end of September.
Saying the federal well has held up better than expected with 3
months of production now: IP 1,970 BOEpd
30 day 695
60 day 531
90 day 447
- Lewis and Clark – 60 miles SW of Sanish, 220,000 net acres setting up 550 locations, 3 wells drilling now, 3 wells completing now, hope to have results by end of September.
-
- Valuation: Cheapest of the Bakkens.
BEXP - Rolling On
- Recent acreage additions have bridged the gap between Rough Rider in North Dakota and Pale Rider in Montana, in both states.
- Montana will see two more wells prior to year end (October and November spuds)
SSN - Ready For The Next Leg Up - not a lot to add to yesterday's comments other than two comment for the catalyst list and a third comment for the future of their Bakken program:
- The next 2 Bakken wells are to be fracced beginning this week, and should take about a week, so first of week of September we should get updates on those with IPs before the middle of September.
- September 6th, management expects the full upper end of the deal price on their Niobrara sale
- Management said that have notional acquired a second set of Bakken acreage (sounds like another 6 sections).
.... Today From Enercom
- UPL - 10:50 AM EST
- GMXR - 11:40
- MMR - 12:30
- CXO - 12:55
- HK - 1:20 PM EST
- ROSE - 3:30
- TAT - 6
- USEG - 6:50
Other Stuff
- AXAS announces Eagle Ford JV
- $100 mm joint venture with private Blue Stone O&G
- Blue Stone brings an initial $25 mm in cash + $50 mm later (for a 75% interest in the JV)
- AXAS provides the land, bringing 8,000 Eagle Ford shale acres for their $25mm (valuing the land at $3,125 per acre which is not unreasonable alue) contribution.
- Probably a good deal for perpetually cash strapped AXAS in that it will allow them to prove up some acreage and add cash flow for minimal dollars out the door.
- SM Plans Monetizations
- Planning to raise $300 to $500 mm in next months
- May punt Marcellus position
- TAT - more insider nibbling in the stock
Odds & Ends
Analyst Watch: Nada
China oil demand slows (from record levels)
From Platts ~
China’s “apparent oil demand” (production plus net imports) slowed in July, declining from June’s record high of 36.74 million metric tons (mt) to 35.82 million mt or approximately 8.47 million b/d, according to Platts’ analysis of official data from the People’s Republic of China.
July demand is down 5.6 percent from June and is up only 2.7 percent from a year ago, a sharp drop off from the double-digit year-on-year gain reported for the prior month, Platts reports.
Ugly open on tap,
S&P called down 13.4
DJIA down 115
BP down another 3.5%
WLT down $2 on small volume, probably going to see big % moves on little volume early.
SD may break into the $3’s
Going to be quiet without BOP around, chime in if you have any questions, otherwise I’ll be doing a few quick trades off the morning open if it’s particularly bad and catching up on some play research.
Oil moving on a triple bottom now:
http://www.barchart.com/charts/futures/CLV10
Thanks TEX for your 2 cents last night on frac water cleanup. I think Ecosphere’s idea is both after frac water cleanup and reuse and also pre-frac water cleaning to reduce scale/bacteria growth. That announcement yesterday was the first time I have seen them really tout pre-frac water cleaning to help down hole frac results. I agree that the after frac cleaning may be a bit much. But if they can save dollars that would be spent on scale inhibitors and other frac ingredients and produce “better” downhole results that is of more value. That is why I was interested in the comments Ely made.
Emailed in from Nicky:
Next support is 1040.
Today and tomorrow in particular I thought would be a little more positive….this not good. It really does open the doors to 950 and maybe 890 into October.
Existing home sales fall 27.2% in July. I’m going to let the market absorb that one for a bit.
ZTRADE – ZIM – HAL
For a quick trade.
HAL – Added (15) September $28 calls for $1.06 with the stock at $27.90. HAL has not really moved following the quarterly results which included improved sentiment for their prospects going forward. A rising rig count in the States should help prop the stock if the market catches a bounce.
Z,
Regarding shale plays in California, I think the major thing holding back ANY development in CA is the local government. We learned that CA is the HARDEST place in the world to explore/drill/develop oil & gas fields.
Tex – right, hear ya on that. The CEO got a good chuckle out of the crowd when he went through what an awful place it was to do business, saying that his competitors should look elsewhere, don’t even bother, yada, yada, yada. But the state is the 3rd largest oil producer, his costs are not bad, and the discount fo being a CA producer should already be in the stock chart. I’m just mulling it, that’s all, just watching a little closer around some dates for potentially catalytic wells later this year.
And thanks for speaking up, I was pretty sure my mike was broken.
Re Gold – Important to note the early intraday action today. Whoever dumped huge volume to force price down to 1210 got smacked in the mouth with gold rallying quickly back to 1224 resistance. Obvious games being played here now.
Go HAL, for a quick trade that’s not half bad.
VTZ – thinking it’s thin late summer markets, games being played in lots of arenas at this point.
*dons tinfoil hat*
Agreed, but for gold however it is one of those critical resistance/support turning points that seems to breed odd participation more often than other areas.
*removes tinfoil hat*
Z..why not nibble WLL on this pullback?
Look at the action now… that drop was either blatant manipulation or capitulation (but why would you capitulate at that level).
sd in the 3’s today
the bilkers sold off with the market even though rates rose again
RJ – Great question. Here are my reasons right or wrong.
1) I was thinking quick trade on a broad market bounce.
2) WLL, HAL, EOG, WLT, were at the top of the list.
3) I wanted liquidity, both in the stock and the options.
4) WLL broke it’s 50 day SMA and I looked at the chart and thought, ya know, that could be another June-like senseless dive.
5) I’d been watching HAL since 2q report and the rig count and it meets the liquidity criterion.
6) The China oil demand thing, along with inventories tomorrow which could be weakish also kind of put me off for the moment.
That’s basically it, nothing against WLL, but was worried about the market and oil and wanted something easy to get in and out of with a tiny spread.
The (prices) in the market reflects peoples feelings optimism/pessimism on the future
Does us govt instill good feelings. i think not.
On energy, Salazar is stubbornly holding on to drilling ban. I never seen such a bunch of boobs that we have now running things
re 14 = LOL
Z..good answer.
Bill – Salazar is a piece of work. I saw where the Admin. admitted they plotted out a loss of 23,000 jobs and $10.2B in deferred investment. From what I have seen out of analysts and the state of LA, those numbers are conservative.
First call of the day that I care about, UPL, up in 10 minutes.
Taking notes on UPL, will be in the Wednesday post.
ZTRADE – ZIM – HAL
HAL – Sold the 15 HAL $28 September calls taken this morning for $1.51, up 42%.
Very smooth call at UPL, as always.
Z..very nice trade on the HAL
Thanks J – Nice lunch money. Feels too much like a renter’s market to try and turn it into dinner and breakfast as well.
25..congrats….and I was out this morning……would have paid my “automatic” yesterday!!!!!!!
GEOI: talked with IR after Enercom presentation to find out where 150,000 acres were which were not accounted for in slides (90,000 acres were identified). They are mostly mature HBP acres, many around Starbucks EOR project; she DKed what % of production they account for but will get back to me. Large reserves(though isn’t it unusual to use internally estimated reserve ests. based on 6/30/10 strip pricing? They fully disclosed methodology.)
PV-10 of $419mm, EV is ~$332mm and around $60,000/boed. 24mm boe proved is ~$13.80/boe @ strip pricing.
Talking points: curtailing gas drilling in A Chalk but buying acres; Yegua, EFS, &Georgetown are works-in-progress. St. Martinsville 3D oil project in south LA huge returns:250m boe EUR for 1mm well cost; have 2,600 net acres. Considering slickwater fracs in A Chalk, kind of following CWEI and APA. Mention 4 counties where leases most prospective for EFS, area results are 230-500 boe/d IP rates.
MP – hey, that’s what those LINE distributions are supposed to do, LOL!
GEOI – what did you think of management?
For lack of something better to do am listening to UNT now, them GMXR.
more GEOI: 24,000 net operated Bakken acres JV with REN, 13,000 non-op. located just north of OAS on map, which was just north of BEXP. 640 acre spacing well cost $5.2mm with 400m EUR, 1280 was $6.0 mm and 600m EUR.
Doodling: 37,000 acres X$5,000= $185mm or 56% EV.
GEOI speaker not CEO, think was ops vp. Was not a comfortable speaker, so can’t answer mgt question.
UNT: see if you thing co. would be better if split into 3 pieces?
RMD – re 36, yes, I always think that, can’t deal with the conglomerate discount. Sounds like 24 wells in the Granite Wash this year? Maybe wrote that down wrong.
Left a little cash on the table at HAL, may do the $29 calls on a pull back tomorrow.
Cspan 2 playing the Coast Guard hearings now, note RIG up big, HAL up decently, CAM up a little, BP down hard.
mmr slides up on their web site
http://www.mcmoran.com/presentatn/2010/ENERCOM_AUG10.pdf
Z: If you think Nicky’s lower S&P numbers are correct, have you looked at any puts?
Tom – yes, have looked at a few protective puts for the ZLT, waiting on more commentary from her.
Bill – don’t see much new so far in the slides.
Z – you going to listen to HK?
1520 – yes, they are getting a little back up, MMR about to start I think.
Cspan 2 – saying HAL cementers and BP engineers to testify later today.
Jim Bob (MMR) starting now
31..speaking of LINE….chart @ support??….STOP @ 27.5ish….Chart readers comments??…thanks..
Jim Bob great speaker and sounds very excited about his prospects. I think I heard he just drilled pass salt weld.
Anyways, I got to hand it to him he sounds like a legend.
MMR – enthusiastic as ever, talking about big pile of sand in Blackbeard East, much higher than in Blackbeard West. Given the day, not sure I jump, mulling a little. Stock is back just above the level when they announced the Blueberry Hill update.
HAL back below where I sold it. Will be keeping one eye out for the HAL cementers on CSPAN2.
Bill – on the recent Blubery Hill update he had talked about 105 net feet of pay. Today he said with the pressure and porosity that well will do 100 MM/d.
Rev Jim Bob doing his thing…lol
MMR – options pretty active for the name today, sort of interested in the 12’s.
CXO up next.
West – you a fan of these CXO guys, especially after Marbob?
ZTRADE – ZIM – MMR
Added (10) MMR $11 calls for $1.07 with the stock at $11.55. Liked what I heard on the Enercom presentation but also have been meaning to start increasing exposure to the offshore Shelf names again.
Did HK start yet – my webcast thing has the timer running but no progress with the slides…
Not yet, Concho still talking
1520 – soon, CXO still talking
#58 – thanks
CXO I think quite impressive, any thoughts? Wish market was better.
HK about to start:
http://www.vcall.com/customevent/conferences/enercom/20100823/webcast.html
HK Notes:
HK plans to lay down 1 or 2 gas rigs this year and more next year, in response to low natural gas prices … that drew a round of applause.
…
HK Notes 2
That’s a haynesville rig or two
They will cut 1/3 of their rigs in 2011 if prices are this low
and half their rigs in 2012 if prices stay low
NG at $4.04 now, just to see if those guys notice that kind of a statement.
HK Notes:
“It’s just common sense” to be cutting rigs. He hopes the rest of industry sees it that way too.
I have been saying for a long time its mid 2011 that we see that rig count really back off.
A little debt coming due in 2012, can easily absorb, mentioned possibly selling the Fayetteville Shale position again.
Haynesville –
says frac costs are up 35 to 40% this year, says there is a doubling of frac capacity that will help moderate further increases next year, looking to do some long term deals.
Restricted choke production (14/64″choke)
– think that will let them increase their EURs by 35%.
– 22 wells on restricted rate for their lifetime, all following similar curve, fairly shallow decline.
– basically 8 MM/d restricted IP to 4 MM/d one year out. So a 45 to 50% decline first year, instead of the high rate 80 to 85% blow down style decline.
– Thought one well would have done 7 Bcfe on open choke, now they think its a 10 Bcfe.
– Some of the bigger wells before now are in the the upper teens Bcfe recovery estimate.
…
GHS mentions rumor form Entercom of RRC having oil in the Utica shale fwiw.
ERF @ Enercom has Ft. Berthold well economics.
Oil off $1.50
NG down 2.5 cts, at 4.04
Thanks RMD
MMR trying to move following the breakout session.
RMD – yeah, nice presentation, not one I know anything much about. Those econ on slide 20 look reasonable to KOG’s thoughts.
Doing a RRC vs SWN vs UPL 3 way spreadsheet for tomorrow’s post … working title “why I swapped (not yet) my SWN for green pastures”
What did I say about a renter’s market earlier? HAL almost given back all the days gains as the S&P re-weakens. WLL on the other hand at LOD. MMR hanging onto gains.
HAL and BP guys about to start talking about the cement job on CSPAN2.
if mmr hit the motherlode…
tisdz, treasure island royalty trust, which has a 1.5% orri in the Blackbeard East.
exxi up big today
i keep forgetting who owns what
i know pxp is in both davy jones and blackbeard
ZTRADE – ZIM – MMR
MMR – Sold the (10) MMR $11 calls with the stock at $12 for $1.38, up 28%. It still feels like a renters market.
EXXI is in them but not Blueberry Hill.
Lot of volume in the MMR buying right now. This is likely a function of his Blackbeard East comments that were follow on comments to EXXI’s comments yesterday. I continue to own a half position in EXXI in the ZLT.
CXO………..Excellent management team that has consistently made their shareholders a lot of money…..The pending acquistion of Marbob and their additional acreage in the Delaware Basin with be a huge positive and growth engine for the company……..Also think that CXO is lead company to buy SD’s Bone Springs and Wolfberry properties that are being shopped around… . If you viewed PXD’s recent presentation where they are adding the Lower Wolfcamp and Strawn zones ( Strawberry) to their Wolfberry wells, their early results indicate the possibility of 20 to 30 % increase in these well’s EURs for an additional $ 100,000 cost over 30 to 40% of their acreage………………. Shout out to JB for great chart work.. CXO and SSN probably have two of the better charts in the sector. …….Probably more down side here with more buying opportunities ahead.
i thought the good news was on Blueberry Hill not Davy Jones so why is exxi moving
Bill – Blueberry Hill was early August PR regarding pay entercountered. Moffett just mentioned it would could produce 100 MM/d so good for MMR. But he also talked extensively about the ultra deep and mentioned they could/should see a lot more sand in the Black Beard East well than they did in the BB West well. Sounds like we could here something on pays before they drill ahead, maybe in the not too distant future.
West – Thanks, I sort of casually listen to their quarterly calls from time to time, pretty good stuff.
I just bot pxp calls
they have a bigger position than mmr and hasnt moved. I know as a % of their business it has a smaller impact than to mmr or exxi but shouldn’t it move
mmr is soaring..on a crap day…its amazing
Hear on that Bill, I can’t seem to trade that one. Successfully that is.
re 83. Well he was pretty pumped up.
It also broke up through the 200 day sma, any thoughts on MMR JB? It’s running harder than obviously I thought it would.
HAL now red. Cement guy not really saying anything that would inspire a sell off that I have heard.
Listening to the ROSE presentation
GS reiternates neutral on big (pipeline) MLPs. Citres slower eco. growth limiting cash flow growth, full valuations, lukewarm fundamentals. NS rating N to S, BPL S to N.
ROSE said nice things about Gonzales Cty in EFS.
ROSE Notes:
13-15 MM BOE
fracced 3 of 4 zones, Bakken, Nisku, TFS, all but the Banff, impressed with oil rates out of the 3 verticals drilled so far.
will begin drilling and testing 8 vertical wells. why not horizontals? 1) capital dollars are scarce 2) it goes a long way towards their 10 well area commitment. 3) want to get the science right with the verticals, again, cheaper.
RMD – is GST there?
87 is LEI.
OK, thanks.
S&P tripping lower into the close.
I bought some DDG because there is so little new at Enercom I figure upside is priced in and probably price decks don’t correctly value todays commodity prices. (This usually causes a huge upside rally in the names.)
JB-where do you see support in EOG-to my untrained eye, do not see anything of consequence before 78, which also just happens to be the P & F price obj-it is pretty much in a free fall as of late.
Thanks-voted as always.
API
Oil down 1.85 mm barrels
Gasoline and Distillates up
S&P Cuts Ireland.
Who shot EXXI out of a gun today at about 2 pm ?
didn’t see any news ….
Jim Bob Moffett at MMR
RE: #78, West, thank you much for the kind comments…
RE: #85, Zman, congrats on the day trades today in HAL and MMR, great trading, too bad I could not be there with you on those today…as mentioned Sunday night, I continue to think that EXXI and MMR have some of the best technical setups coming into the week, MMR had a picture perfect retest of the descending triangle trendline this monrning at $10.80, resistance is now at the long term P&F trendlline at $14-$14.50, and as you mentioned, the print thru the 200 day SMA at $12 put MMR back onto a P&F buy signal, consider pullbacks to $12 for long trys…
Re: #93, choices, thank you, I appreciate the time you take to vote, EOG .did hold the important $88 support level on the close today, updated the EOG daily chart over the weekend, I agree with you, there is not a lot of techncial support below this level, the $NYMO closed today at -67.59, so although the indicator is not extreme over sold yet compared to recent readings, conditions are getting ripe for a reversal swing higher, thinking EOG is probably one of the better candidates that pull higher on tha mkt swing …will be watching the $88 level tomorrow…
.
JB – thanks, gotta go vote myself. Agree EOG. Thinking same WLL. Any thoughts on SSN? Fundamentally that has a good chance of legging up by 9/6.
Re:#99, Zman, thank you, SSN really looks good, updated the dialy and added a weekly, thinking of adds to any pullback to $1.15….
Thought VQ was interesting managing to scrape higher today, after a good presentation yesterday. Interesting chart, gap not too far above to fill, even if they are from California.
VQ, is on a P&F buy signal, in X's, above trendline support, but there is something about the chart formation that looks a little heavy on the daily, I would like to see VQ continue to trade above the 100 day SMA at $16.21… a break above recent highs, say $17.30 would strengthen the pattern….