Tuesday Morning – Augmented Conference Notes

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Market Sentiment Watch: Market feels like it wants to take a breather and is running into some technical resistance just above current levels but a string of improving economic data may take us higher in the near term.  The tone has definitely improved. In Energy land, news flow is picking up, as expected with Fall conferences as a backdrop. I'll be on the Rodman presentations all day. 

Ecodata Watch:

  • Retail Sales came in at 0.4% versus a forecast of 0.3%, and at 0.6% on an ex autos basis vs 0.4% expected ex autos.
  • We Inventories data at 10 am EST

Nicky Watch: (She posted this yesterday but the levels are good to go): Now looking for a top in the Wednesday timeframe (plus or minus a day) and then weakness into 21st/22nd September. We have resistance here (and a gap fill) and then 1129 – 31.  Support at 1115, then 1109.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today – Rodman Wrap (TAT, PETD, ATPG, OAS, EGY), Today at Rodman, MCF earnings
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $5,200
    • 100% Cash
    • Yesterday’s Trades:
      • None
  • ZIM (Zman Inefficient Markets portfolio)
    • $6,500
    • 10% Cash
    • Yesterday’s Trades:
      • None. Will be looking to liquidate September positions today and tomorrow.

Commodity Watch

Crude oil rallied $0.74 to close at $77.19 yesterday. Crude is rubbing back up against the upper end of its range partially on an imports pinch point (see below) and it will likely fall back as more clarity on a repair time-line is released This morning crude is trading off slightly.

  • Pipeline Watch: Enbridge found the whole in their leaky midwest 36" oil pipeline, still no word on when it will be open for business. Gasoline prices in the midwest remain lofty and the cracks there (see below) remain elevated as well.
  • Dollar Watch: This looks constructive for crude.

Natural gas rose $0.06 to close at $3.94 yesterday in listless, storm fear influenced trading. Gas is in the shoulder season with reduced demand for heating and cooling and has a holiday to contend with this in this week's numbers.  This morning gas is trading up 5 cents.

Tropics Watch: The remnants of Gaston are now south of Cuba and aimed in the general direction of the Gulf. This could spin up at any time.

Crack Spread Update

Key Thoughts:

  1. You can really see the effect of Enbridge's pipeline outage on mid west cracks. Probably short lived
  2. I continue to watch the group, thinking now there is some upside to near quarter estimates but the group continues to languish and may do so through earnings. I plan to do a trade or two closer to earnings time. 

Stuff We Care About Today

Rodman Day 1 Wrap - Augmented Notes From Day 1

TAT Waiting on Month End

  • Thrace Basin – 10 mm/d net, 10 mm/d awaiting pipe (same as last time) , most of the 2nd 10 will be on by year end. They continue to receive $7.25 to $7.50/ MMBtu for natural gas.
  • Thrace Basin deeper potential – tight gas sands, going to be fraccing stuff that is "new" in completions in Turkey but would be run o the mill in the States
  • Plan is to take old "show wells" that were uneconomic, 600 m/d wells long ago, to high rate wells via fraccing.
  • Selmo  – 2,000 bopd net now … this has been the real disappointment relative to my initial look here, was forecast by them to be much higher.  Added a 2nd rig in August.
  • Arpatepe – 250 bopd (this is where they've been doing acid jobs, and seeing strong results. (30 bopd, acid, 500 bopd in March, now 350 bopd (gross))
  • Bakuk Anticline – gas discovery, "tremendous gas show", very large structure, not news, thinking it could be 10 mm/d open, but produce at 6 mm/d, now looking for an oil leg.
  • Exploration on Block 4175 (southeastern Turkey) – Expect results around the end of September. Experience with their Turkish operations forces me to add two weeks to that unless they are blockbuster results. This well has the potential to be a game changer if they hit a big one as it is an analogue to structures seen in nearby Iraq. No comments other than they have set intermediate casing and are drilling ahead.

Nutshell: I own it and although I have been displeased with the lack of production growth in Selmo (oil) and with the delays in fraccing and drilling in the Thrace Basin (gas) I am willing to given them another quarter to right the ship and get back on a growth trajectory.

PETD - Niobrara Around The Corner, Marcellus In "Go" Mode

  • Total Reserves of 36.4 Bcfe (6.06 mm BOE)
  • 97% of company is in the Wattenberg (CO) in terms of reserves
  • Recent move to dump Michigan gas assets in favor of West Texas Permian (Wolfberry) assets looks like a no brainer.
  • Getting oilier, have been gassy but going to 65/35 oil / gas mix in 5 years as a target
  • Identified potential reserves to double current reserves, can do almost within cash flow.
  • Wattenberg Field

    • 70,500 net acres, they are 30 miles from EOGs wells
    • There are 10 NBL horizontal Niobrara wells in and around PETD's position
    • NBL's early things on these is that they are 300,000 barrel EUR wells
    • One of NBL's wells was a horizontal in amongst verticals and it has been NBL's best well to date
    • 'PETD thinks their whole acreage block is prospective, no rush to drill all Held By Production, so letting others do the early heavy lifting, figuring out the best completion methodology etc
    • They will spud their first horizontal Niobrara in October.
  • Based on industry data, their data and estimates:
    • Vertical Wattenberg – $600K cost, 43 boepd IP
    • Horizontal Wattenberg – $3.5 mm, IP of 289 BOEpd… better returns
  • West Texas (Wolfberry)
    • 120 locations
    • oil
    • $1.25 mm a pop
    • Starting 1 rig program in 4Q, will flesh this out more in tomorrow's wrap post of this.
    • Targeting 70% 3 yr growth
  • Marcellus
    • 60,000 net acres
    • 3 wells completed so far, thinking they are at least 3 Bcfe wells, maybe as much as 5 Bcfe.
    • 3D done, no problems in terms of geohazards on their acreage identified, add another 3D shoot this fall to get complete coverage
  • 1 well program restarts late Q (after drilling the first 3 they wanted to step back and see what they had)
  • Hedges – big piece hedged (78%) above $6.17 for 2010; 2011 @ 74% @ 74%.

Nutshell: Stock remains very cheap at 3.7x 2010 and 3.5x 2011 expected CFPS despite the recent run. With a strong balance sheet and growing oiliness I would expect 2011 to be a solid year for them starting with a number of catalysts in the 4Q10 period. 

ATPG - Wating on Telemark Production / Triton Monetization

Not a lot new in yesterday's presentation, however, they did take the time to address the large short position in the stock. And I paraphrase: "We have 3 large catalysts that are going to occur near term,

  • 1) Production ramp due to Telemark, plus 2 other wells,
  • 2) Titan monetization (almost closed in April), working to close, met with them yesterday, it will happen, don't know exactly when,
  • 3) Two more re entry permits at Telemark will be granted, we think by year end.

OAS - Nothing new at conference in their presentation. This is still very oily (about 93%), with almost 300,000 net acres in the Bakken, a 4 rig program, going to 5 rigs this month, with massive triple digit production but off of a small base, and no debt and enough cash and cash flow to fun the next 18 to 24 months of Capex if they don't go all land crazy.

EGY - Looking For A Future Golden Coast

  • Gabon, Angola now, looking for a third area of opportunity
  • 99% oil
  • $97 mm cash on the balance sheet
  • No debt
  • Around $50 mm cash last year and this year
  • Reserves - 12.94 mm barrels
  • TEV / Reserves on a $/ BOE = $18.60 / BOE, probably about right for them if they weren't so cash heavy and on the hunt for another play.
  • 2Q Production of 20,200 BOEpd just to give an idea of scale hear.
  • Gabon

    • Offshore is the beig piece with a 1.4 mm acres

      • Production comes from 3 offshore field via floating production storage offloading vessel
      • Drilling a horizontal well now as replacement well to an older well in a separate fault block, takes them up by about 3,200 bopd.
      • One new well coming on at 3,000 bopd in the 4Q
      • FPSO has 30,000 bopd capacity, currently seeing 21,000 bopd plus water, so at about capacity.
      • Two prospects to spud off Gabon in a deeper, and lower quality sand (Dentale) in 2H10 (20 mm BOE target) and 2011 (relatively big target at 85 mm boe).
    • Onshore

      • Joint Venture announced in August with TOT - to pay 75% for 50% in the 270,000 acre concession
      • They have 4 to 5 prospects worked up and TOT thinks they can find 100 mm boe on the acreage
      • TOT has a pipe that runs right by the acreage on the coast.
      • reprocessing seismic and will spud their first JV well next year.
  • Angola

    • Opened a data room last week to form another JV on the offshore Block 5
    • 1.4 mm acres in shallowish water
    • They have 3D over it and a handful of prospects.
  • Future: They want to earn a return on their cash. Sounds like they want to do a deal pretty soon, like in the next six months. Mentioned adding a third country in the offshore Africa trend or even going to the States, and there he mentioned the Bakken. That would be pricey. All

Nutshell: Looking at multiple opportunities to "maximize shareholder value" while sitting on a pile of cash, no debt, and stable cash flow is just about never a bad thing. These guys strike me as hungry. Excited. Ready to run. I've come close to entering the shares a number of times. Look for a better write up than the book report above in the near future. 

Tuesday At Rodman Renshaw:

Other Stuff:

MCF Reported Fiscal Year End 2010 Results

  • Production has recovered from a pipeline snafu and improved with the addition of a new well, now at 105 MMcfepd, about 75% natural gas.
  • Revenue of $41.2 mm vs $44.6 mm expected
  • EPS of $0.95 vs $0.96 expected
  • No conference call as per standard practice
  • Nutshell: As usual, not much in terms of details on the numbers and that's OK since they are barely covered by the Street. LOE / Mcfe for the year was an ultra low $0.61, an improvement of 2009's $0.87/Mcfe and back to 2008 levels. They continue to buy back stock and remain debt free. Looking ahead to FY11, their budget of $82.5 mm consists of 4 offshore tests ($60 mm) and 15 more onshore Cotton Valley wells ($1.5 mm apiece) in its JV in Panola County, Texas. I don't own them but I continue to like these guys.

XCO Targeting 30% growth for the next 5 years.


Odds & Ends

Analyst Watch:

  • Berstein changes service ratings:
    • RIG target raised from $88 to $94, Outperform
    • RDC target up $2 to $34, Market perform
    • PTEN raised $1 to $20, Outperform
    • PDE raised $1 to $38, Outperform
    • NE raised $3 to $49, Market Perform
    • NBR cut $6 to $30, Outperform
    • HP upped $2 to $50, Outperform
    • ESV upped to $50, Market Perform
    • DO upped $1 to $70, Market Perform

Interesting Reading Watch:

150 Responses to “Tuesday Morning – Augmented Conference Notes”

  1. 1
    elduque Says:

    Baltic down a little.

  2. 2
    BirdsofpreyRcool Says:

    wow, z… did you even get to sleep last night?  Nice write-ups.  Normally, one has to do business with about 4 or 5 major trading desks and compile a couple of analyst reports in order to get quality info like this.  Very much appreciated!

  3. 3
    zman Says:

    Futures up to flat from down early as the retail sales numbers give us a boost.  Crude off a dime, NG up a nickel.

  4. 4
    bill Says:

    Robry +99 now

  5. 5
    BirdsofpreyRcool Says:

    Glad you're warming up to little EGY.  CEO Bobby has a banker-background.  But he has been able to overcome that learning disability and focus on what bankers can do best… make money.  It just took him the last couple of years to get the fire back in his belly.  COO Russell is a joy to talk to.  You can almost "see" the aura of competence around his head.  EGY operates under the radar (as a single digit midgit), but it is worth spending the extra time to dig through.  Lots of catalysts there over the next year.

  6. 6
    zman Says:

    You know we sleep on the weekends. Thanks for your thoughts on EGY. I had been less of a close on observer. Good presentation by them, good story. Sleeper in my mind, kind of buy and holdish with the knowledge that within a year they will be a bigger, somewhat different looking company. I do think chasing glitzy named plays in the States would be a mistake for them unless they can pick off someone undervalued, not sure who that would be. Cheaper on flowing barrels, cheap on cash flow. Lots of cash, no debt. Stable cash flow. Just sort of maxed on their current projects so they are on the hunt. 

  7. 7
    jat Says:

    Know some people follow WLL here… am hearing through brokers that company confirms diffs widening from 9-10 to 14-16 with enbridge… doing some rail/trucking workarounds but will still hit Q3.

  8. 8
    zman Says:

    BOP – banking experience a plus unless you stay too long and get twisted from mere hobbit into a smeagal. Thankfully my 19.5 years in the business only including 1.5 in a banking role.

  9. 9
    zman Says:

    Jat – yeah, that makes some sense. I think it is a blip. If you want to get the one that probably has less impact, it would be EOG, as they have their own train.

    MHR starting at Rodman in 2 minutes.

  10. 10
    jat Says:

    It just occurs to me now that the only way to reduce our dependence on foreign oil seems to be shutting down all the pipelines entering this country.  Seems like this NY line in from Canada is down too

  11. 11
    BirdsofpreyRcool Says:

    EGY — agree on the aqusition risk.  Frankly, would kinda hate to see them jump into the Bakken at this point.  CEO was kicking the idea (of the Bakken) around about a year ago.  At that point, there were still some struggling companies and cheap assets (well, cheaper, anyway) there.  Now, not so much.  So, think that train has left the station.  Would like to see them do something more "unexpected."  Like buying shallow water gassy GoM production… or maybe even something like producing assets in somewhere like Turkey.  EGY has proved they know how to deal with govt entities (like Gabon and Angola)… but in those countries, dealing with govt risk has its reward.  Can't say the same thing for here in the US. 
    Speaking of political risk… Bromwich on the tape y'day, talking about how he will issue shallow water drilling permits when companies and demonstrate that they are safety compliant.  WTF?!  Thousands and thousands of wells drilled in shallow water with no "Macondo-type incident."  It is so purely-political, it makes my stomache turn over. 

  12. 12
    zman Says:

    TSLA and Toyota to produce a fully electric RAV4. Sounds like the show car comes out late this year for a 2012 model.

  13. 13
    zman Says:

    Re 11 – hear ya on all of that.

  14. 14
    BirdsofpreyRcool Says:

    #11 erratum = "can demonstrate"

  15. 15
    BirdsofpreyRcool Says:

    The pre-winter run up in nat gas prices appears to have begun… right on schedule.

  16. 16
    zman Says:

    BOP – any thoughts form HT?

  17. 17
    BirdsofpreyRcool Says:

    I'll check in a bit.  Didn't check in with the desk yet this morning.  And it really irritates HT to bug him right at open.  So, give me a few.  It's not nice to irritate HeadTrader!

  18. 18
    zman Says:

    MHR went from 3 to 13 analysts covering in the last year. Hmmm.

  19. 19
    BirdsofpreyRcool Says:

    z — JMHO, but if you can snag EGY at any price around 5.50, it is usually a decent place to stick a toe in the water….

  20. 20
    zman Says:

    REXX about to start. Niobrara/Marcellus, no debt, looks set to run on production growth. 


  21. 21
    tomdavis12 Says:

    Z: Did get an entree to the Barclay's Conference from my NE contact. Do you have the list of who is presenting tomorrow. Any names you want me to poke my head into or breakout sessions?

  22. 22
    zman Says:

    Thanks BOP, doing my DD over the next little bit here.

    Stocks starting off weak on no volume. S&P didn't hold early bump from retail sales. Shorts jumping on it now according to Kass.

  23. 23
    zman Says:

    Tom – I don't have a full list, just those who have pr'd that they will be there. Can you send a list?

  24. 24
    tomdavis12 Says:

    Z: I see WLL will be talking at about the same time as NE. Drats. Bill is usually the superstar at pulling up that kind of info. I don't usually spend the time.

  25. 25
    zman Says:

    REXX presentation late/delayed/dunno

    EXXI up next, then GST, WRES, KOG – busy, good day.

    S&P cracking lower, at Nicky's first support level of 1115.

  26. 26
    zman Says:

    Volumes in our names very light on this almost all red day.

  27. 27
    zman Says:

    Jat – hearing anything negative on the SLB front? Shorts are rumoring at lowered guidance tomorrow. Sounds wrong to me.

  28. 28
    zman Says:

    Market off on German data:


  29. 29
    zman Says:

    EXXI call starting now.

  30. 30
    zman Says:

    EXXI Notes

    Production capacity on slide is 26 MBoepd, says its more like 27 to 28 now, with 4,000 boepd coming on in the next few months

    Declines lower than your usual 25 to 35% per year offshore rate, especially including behind pipe reserves, where you just slide a sleeve for cheap $

  31. 31
    zman Says:

    Business inventories up 1%, more than expected, giving the broad market a bit of a lift here.

  32. 32
    VTZ Says:

    Gold new alltime high.

  33. 33
    zman Says:

    EXXI Notes 2

    On the Shelf, we are getting all of our work done, they have only 1 well that needs a new well permit and they are looking at a sidetrack to get around that. And Lafitte with MMR. Business as normal on their plan.

    The ultra deep:

    Nothing new so far. …

  34. 34
    zman Says:

    EXXI Notes

    Blackbeard East – at 24,000' drilling ahead, have LWD on, will announce pay as they see it.

  35. 35
    jat Says:

    Re 27, not really. I'd be interested in what you're hearing. I know some of the fast money hedgies have been playing the long slb/short bhi since the beginning of the month, so perhaps they're taking a little off. 
    I mean it's possible that Gouldsays something along the lines of the international ramp being a little slower, but that's been out there for months now since the European crisis over the summer.  He nearly always ends every forecast with "barring another global recession" or some similar caveat so that wouldn't really make me throw up my rubber chicken lunch at the Sheraton.
    I'm biased to think that his epistle is positive.  The SII deal just closed early, and he's going to want to talk it up.  Deal will be more acc than thought previously.  He has a lot of firepower to buy back stock, and he's not restricted any more in terms of buying back stock.
    Bill Herbert just upgraded them at Simmons yesterday.  He's probably the best osx analyst out there.

  36. 36
    bill Says:

    exxi cashed in some ng hedges

  37. 37
    zman Says:

    Jat – it cam from Kass who I'd bet is short. He continues to talk about vague rumors that often don't come true. Nothing to back it up but he throws it out there because it inspires fear and he's short the market now in general. I'd go with Simmons any day over what Kass is spewing.

    I heard nothing new from EXXI – BB East news could be any day to weeks away.

    GST about to begin.

  38. 38
    zman Says:

    VTZ – Nice call.

  39. 39
    BirdsofpreyRcool Says:

    listening to Schiller, I don't think we are going to see EXXI pick up PXP's ownership in the Ultra-Deep.  Think they will use their excess cash flow elsewhere.  This is good, i think.  As the mrkt is not giving much (any?) value to the Ultra-Deep contingent reserves, anything EXXI spends to buy out PXP's position would be dilutive to EXXI shareholders.
    So, think that train has also left the station for EXXI.  Difference is, EXXI already has a seat in the First Class Car.

  40. 40
    zman Says:

    Oops, GST begins at 10:50 EST.

    BOP / Bill / anyone – have you heard any price talk out of Flores /PXP for the ultra deep. Is PXP punting everything in the Gulf or just the Ultra?

  41. 41
    zman Says:

    Sort of looks like shorts are having a hard time keeping this market down. spin, spin, spin.

  42. 42
    elijahwc Says:

    Quick drive by on #18 MHR:
    Strikes me that if Gary Evans pulls off the full beachfront assualt described in the Eagel Ford the new target for those 13 analysts will be north of 10.
    Data points: HAL is fracking the Gonzo 50/50 with Hunt this week and two more 100% drilled (only one more was thought to be nearing compl.) and maybe up to 3 more before year end.  All in the oil zone. Then one well a month.  Rig K'd through 2011.  Low land cost, 325 – 350 acre.  300/350 locates.  AND, NONE OF THIS STUFF IS ON THE BOOKS……..yet.
    Also, he inferred that they were doing lots of "stuff" with EOG and then commented that we should expect a second and third JV announcement  of significance soon.  Wonder what but sure it involves banking for the employers of the 13 aforementioned analysts.
    Also, in MS land cost on Triad assets essentially zero so handsome ROI even at these prices.

  43. 43
    blackgold39 Says:

    Z – you see any movement on BP in the near term?  The have been creeping, but I imagine it is just tracking lightly with crude….I am about to punt these Oct 41s, 42s, and 45s in another couple weeks if there aren't any catalysts.

  44. 44
    BirdsofpreyRcool Says:

    z — PXP wants to sell all it's GoM holdings.  Question is, do they sell it in one piece?  Two?  Three?  How much can they get for it??  Also, kinda ironic, as Flores got his start in the GoM. 
    Also, what the heck is Flores going to put the porceeds money in?  The Bakken??  sheesh.  Other thoughts are that tossing the GoM assets makes PXP more attractive as an acqtn target.  Not sure Flores wants to cash out again, but we'll see.  His BoD is handpicked, so they will go along with whatever Jim wants…

  45. 45
    bill Says:


    Looks like more hedges replacing ones recently cashed in.

    Ward throwing in the towel for 2011 65-76 % hedged

    New Oklahomo play never heard about before (page 13)


  46. 46
    zman Says:

    Thanks Eli

    BG39 – I don’t know. Saw the Coast Guard tell BP to hurry up on the bottom kill. Um, hasn’t the govt. been the hold up all along on that? Ugh. BP also said it sees claims in the future coming in at least than $20 B, said that yesterday and the stock didn’t budge much. I think it still gets a spurt on the final kill but don’t know when that will be.

  47. 47
    elduque Says:

    do you have any thoughts on DVN. on my work they look cheap to their peer group.

  48. 48
    bill Says:

    If PXP sells off pieces, exxi has a right to buy or add to present position.

    I dont understand why the are selling at lows unless they think its going to get worse

  49. 49
    zman Says:

    re 45. Oil play. Bakken is Mississippian. Not shale, no mention of porosity but says it’s high permeability with a thick section.

  50. 50
    BirdsofpreyRcool Says:

    bill — with ya on PXP. Why look to sell the Ultra-Deep now? Just don’t get that.

  51. 51
    zman Says:

    DVN – I’m waiting to see how they redirect cash from their offshore puntjob. They do look cheapish.

    SPX turning green, group tracking.

    GST presenting in 2 minutes, for a primer look on the reports tab or here:

  52. 52
    zman Says:

    EOG moving higher, in the money calls to get punted today, with a few higher strikes left in place in case they wow the crowd at Barclays

  53. 53
    zman Says:

    GST started, don’t think I’ll have much to add to last week’s comments but may add a tidbit or two.

  54. 54
    bill Says:

    for the moment bdi has topped out, rates slightly weaker


  55. 55
    ram Says:

    ZMAN – It’s the EGY’s, KOG’s, SSN’s, GST’s, etc. that if they work, helps 401K’s leverage and improve accounts, FWIW.

  56. 56
    BirdsofpreyRcool Says:

    GST — 1st glen rose well… translation = “we f*d up the completion, drilling an offset well… if we get that right, we will report both”

  57. 57
    Dman Says:

    Seems to me that the gold/silver explosion has dragged up crude and maybe even the broad market as the realization spreads that it’s the “price in gold” that will matter when there are no strong currencies to be found.

    Silver broke out on the daily chart about a week ago, but the all-time high from 3 years ago is still about 5% away.

    GDX & HUI still just shy of all time highs. No doubt the deflationistas will have a good explanation for this.

    Since OPEC’s sheiks keep an eye on the price of bling, they are going to be unhappy with $75 at some point. Would really like to pin down Mr Prechter on exactly when we will see $5 crude.

  58. 58
    VTZ Says:

    Definitely the weakness of the dollar is contributing to the relative strength in crude and crude is essentially flat excluding the volatility there.

  59. 59
    zman Says:

    GST – heard little new. Sounds like they will release Glen Rose 1 and 2 results with 2 hoping to be better than one on completion methodology some time mid to early 4Q.

  60. 60
    zman Says:

    Ram – Do you want to see more individual co. reports on the little fish?

  61. 61
    jat Says:

    re 51, DVN has been buying back a ton of shares in the lower sixties since the quarter, and they’ve been leasing up in oil

  62. 62
    ram Says:

    Yes, the research you do here is second to none in helping the inexperienced understand the past, present and possible futures of little fish turning into medium fish. In no way is the above comment intended to state or imply that ZEB or any of it’s affiliates engages in providing any sort of advice.

  63. 63
    Nicky Says:

    Morning all. I think the low this morning concluded the abc wave iv pullback. We should now be in v up. I am still looking for a top between now and Thursday but tomorrow looks like a stronger up day than today. That and Wed and Thurs are rumoured to be Fed POMO buying days and this market could still move much higher. I am not discounting the possibility of 1150 by Thursday/Friday.

  64. 64
    zman Says:

    Jat – hearing they are paying big $ for acres in OK.

    Ram – thanks, may have to have you have lunch with my lawyer, took him 20 pages to say the same thing in the “terms and conditions”

    Morning Nicky, thanks much.

  65. 65
    bill Says:

    For your tv viewing pleasure>>

    New episodes of Black Gold are on TruTV

    Last night episode of shotgun toting landowner keeping watch on drilling activities on her land

  66. 66
    ram Says:

    I consider the little fish Leaps in my 401K.

  67. 67
    tomdavis12 Says:

    Z: Last night CHK posted their Sept Investor Presentation. Page 16 good EFS map. Page 36 NAV $90.77/sh @ $6.00 NG. Lots of leverage on this puppy. I know you have gotten away from the name.

  68. 68
    zman Says:

    Thanks Tom, yeah, away for now.

  69. 69
    zman Says:

    KOG presents in 35 minutes.

  70. 70
    choices Says:

    DX broke 82, now @81.50, some gurus seemed to think that breaking 82 was significant, further downside-strong FWIW

  71. 71
    zman Says:

    Volumes pathetically light in the group.

  72. 72
    zman Says:

    Group diverging from broad market a bit here, again, no volume, kind of like still no one cares. Same for other non E&P energy, coals, refiners. Apathy at the moment.

  73. 73
    zman Says:

    Nicky do you still see 1129-31 as resistance or is that off now?

  74. 74
    VTZ Says:

    RE 70: Why do you think gold finally broke out? It was the only thing holding it back for those who believe that there is no link to the USD anymore.

  75. 75
    zman Says:

    Nicky – good point re the POMO days. Today nothing, market drifts, Wed and Thursday, different deal if the Fed acts.

    Good comments re POMO

  76. 76
    zman Says:

    KOG about to start:

  77. 77
    VTZ Says:

    Also, that parabolic move that Z referenced a while back is actually on the table now. Especially if the market starts to pullback at Nicky’s resistance. The timing for gold is good now: seasonally, technically on breakout, and cross-asset wise if the USD and equity markets both come out of favour.

  78. 78
    zman Says:

    KOG Notes

    2 rigs now, 3rd rig by end of year, + 2 more non operated rigs with large interest.

    1500 to 1600 BOEpd now

    Completed a frac yesterday

    2 more wells will be completed by end of September

    7 more wells to be completed by end of year

    Target of 2,500 boepd for exit 2010, but they think they easily beat this.

  79. 79
    Nicky Says:

    Z yes we are at a resistance area here 1127, 1129/30, 1135,1147. I just think with the way this is setting up we go higher.

  80. 80
    Nicky Says:

    We are likely still working on the end of a complex wave 3. 4 down needed starting sometime this week and lasting a few days and then a final move up into the end of next week for 5. Then we should have a good shorting opportunity to correct, at the least, the first complete wave up. So I would be looking for at least a 50% retracement of the rally into mid October or later.

  81. 81
    zman Says:

    KOG Notes 2

    2011 drilling budget taken care of by the recent equity raise. No kidding.

    Potential locations on their acreage now is 213.

    Good map on slide 10 if you like to know where they are relative to the other players in their FBIR area.

    Still drilling both short and long laterals.

    First Three Forks well drilled but not yet completed.

  82. 82
    zman Says:

    Thanks much Nicky

    KOG Notes 3

    Short laterals $6 mm cost at $75 oil = 32% IRR

    Long lats $8 with $75 oil = 49%.
    at $65 oil these are still 36% IRR

    Early short laterals were probably 350,000 barrel wells

    The long laterals are probably 650,000 barrels.

    IPs have stayed the same but the 30 day rate has jumped dramatically. (slide 14)

  83. 83
    zman Says:

    KOG Notes 4

    Working on spacing issues, trying to figure out how many wells they can pack into one drilling unit, like everyone else.

    KOG is a non-operated partner in a Questar Three Forks well in the area. They can’t say the rate but they are very pleased.

    Another operator has a good TFS test in the same area.

    Plan is to drill 2 Bakkens and 2 Three Forks off the same pad. They think the TFS will be productive over their acreage.

  84. 84
    zman Says:

    TAT back over $3.

    SD approaching $5. Nice trade Eli.

  85. 85
    choices Says:

    No movement on KOG price-mkt greeting call with what’s new attitude-seemed from your notes, Z, no real problems but no wow’s either.

  86. 86
    choices Says:

    I’m laying in some VXX here, small short mini-ES but way too early-bond does not seem to want to go down w/this mkt strength, Euro also still fairly strong w/the DX weakness

  87. 87
    zman Says:

    KOG Notes 5

    Koala area – first well spud offsets at 3,460 boepd IP OAS well (the Angel well).

    XOM is bringing in those 2 non-operated wells mentioned above.

    Choices – it is a little better than I was thinking in terms of that end of year exit and on the Exxon rigs. I had thought 2,500 boepd was more of a hard target for year end given the frac delays but they seem more than confident it will be higher than that sooner. I think the IPs staying flat has kept the stock flat but their 30 day and long rates are what give you CF, not the flush rate at the beginning although it looks nice in a pr. Will have this in better form in the post tomorrow.

    2011 – $75 mm capex, not yet official, will be covered by cash and cash flow almost entirely, means they will dip into revolver late next year. My sense is that the next equity deal is at least a year away.

  88. 88
    zman Says:

    I’ll be on the VNR call in 25 minutes, grabbing a bite.

    Lynn of KOG sounded more confident that he has on the last several calls. Less excuse making, more growth talking.

  89. 89
    BirdsofpreyRcool Says:

    KOG = as good a presentation as I’ve heard them give. Lynn always sounds like he would rather be somewhere else, than explaining what is going on. That said, they finally seem to have a lot going on. Getting (was it 7?) wells completed b/f the end of the year will be a nice pop in cash flow.

  90. 90
    zman Says:

    Yes 7, fracced one last night, 2 more by September end and then 4 in the 4Q.

  91. 91
    zman Says:

    CSCO to initiate dividend in 2011. Man are people easily pleased. I know, I know, speaks to outlook confidence.

  92. 92
    VTZ Says:

    Dollar breaking 81 on the dollar index.

  93. 93
    VTZ Says:

    Correction… bouncing apparently.

  94. 94
    zman Says:

    VTZ – pretty directionless like most everything, except gold.

  95. 95
    VTZ Says:

    Gold and the USDX traded almost perfectly invertedly today so far.

  96. 96
    cargocult Says:

    Fredriksen, also chairman and main owner of the world’s number two deepwater oil rig group Seadrill Ltd , said the company aims to challenge market leader Transocean Ltd’s position within a few years.

    Seadrill had said on Tuesday it was ready to throw its weight around now the Gulf of Mexico oil spill has made life harder for smaller players.

    “There will be a lot of consolidation,” he said. “There are a lot of small companies, with four to six rigs, struggling with their deepwater rigs. These are the kind of companies we consider acquiring,” Fredriksen said.

    Most drillers smaller than the U.S. “big three” — Transocean Ltd , Diamond Offshore Drilling Inc and Noble Corp — could be targets, investment bankers say.

    Fredriksen said BP’s Gulf of Mexico accident could indirectly benefit Seadrill, with its relatively modern fleet, as the industry faces stricter regulation, though he remained optimistic on the mid-term outlook for deepwater drilling.

    “I think the market will come back faster than most people expect. I would say between 12 to 18 months,” he told Reuters.

    Fredriksen said he would also look at acquisitions in sectors other than oil rigs.

    “We are looking at all sectors, but it depends on the timing and the pricing,” Fredriksen said. “Jackups and deepwater drilling rigs are the most interesting areas to invest in (for the moment)”. (Writing by Richard Solem; Editing by David Holmes)

  97. 97
    West Says:

    SD…..Quite a bit of interest in their Wolfberry and Wolfbone positions that are being actively shopped. Look for SD to get over $ 200 mil for their Wolfberry acreage . Many of the Wolfberry wells in Martin Co. IPing for over 200 boepd which is an excellent well. Fasken Oil and Ranch right on Midland/Martin Co lines averaging 200 boepd on almost every well. Fasken is proposing a gas processing plant for the area but has some infastructure problems to be resolved. Energen just bought private co Limestone Partners’ property in Martin Co for $ 180 mil for 8700 acres, 19 producing wells, 142 PUDs, and 50 probs and est reserves of 18 mil boe proved and 6 mil probable. I will have to double check but I think current production is around 800 boepd. I believe that a deal should be announced here in the next 60 days………….The Wolfbone/Bone Springs acreage is a little bit more of a unproven area but defintely an area of high interest. This acreage could be sold for more if they would do several packages but I don’t think that will happen. They should get at least $ 4 k /ac on this property. This part of the play is only about 2 years old so selling some blue sky or not, depends on how good your information may be.

  98. 98
    zman Says:

    Thanks West, are you a fan of PETD?

  99. 99
    West Says:

    Most definitely

  100. 100
    zman Says:


    Obama turns down free set of solar panels for the White House roof. Price not high enough I guess. Or maybe it’s that Carter originally put panels on the WH which have since been removed and he doesn’t want the association.

  101. 101
    zman Says:

    Re 56, just saw that, exactly , LOL.

  102. 102
    skimo Says:

    Let’s see- Obama adding new bureaucracies for health care, consumers and of course, the interior dept. Castro brothers laying off 500,000 Cuban gov’t workers.
    To quote a movie line “I’m so confused.”

  103. 103
    crysball Says:

    Tocqueville Asset Mgmt. (NYC based wealth mgmt. Company) has acquired over 7.3 percent of Vaalco Energy, making them the largest stockholder.
    am of the impression they built this position in the the last couple of months, as don’t recall them showing up In previous lists of major stockholders.

    67 % of EGY now owned by ‘TUNES’.

  104. 104
    zman Says:

    Goldman cuts US Industrials, Energy sectors to Neutral. Almost always in an expiry week do these guys make big sector ratings changes.

  105. 105
    ram Says:

    Re 104, that’s a means to have your clients clean up on sold calls.

  106. 106
    nifkin Says:

    Tocqueville had been a holder since 2008- last quarter they bot 2,886,549

  107. 107
    Dman Says:

    #105 – or Goldman sold their clients the calls 🙂

  108. 108
    zman Says:

    Waiting for the BBG call to start, sounds like a bit of a change in the usual plan in the offing there. Normally all Rockies gas.

  109. 109
    RMD Says:

    VNR: soapbox time: I don’t like anything called a “product”, which VNR called themselves.

  110. 110
    zman Says:

    WLT continues to try and break out today.

    RMD – LOL.

  111. 111
    zman Says:

    Maybe EGY, who is looking to buy something, should take out CPE. Lots of Permian room to run, and they could utilize their experience in offshore to run the Gomex, deciding what to do with the Haynesville in the first year or so.

  112. 112
    zman Says:

    CPE call starting in 5 minutes. In a nutshell, using the Gulf to fund the Wolfberry.

  113. 113
    Jerome Blank Says:

    ATPG…trying a Sept $12.50 swing trade down here, thinking if the mkt holds, ATPG might test $13 before expiry… holding up well all day….

  114. 114
    milepost_43 Says:

    TGA MidQ update…clears $8 and holds above rising upper BollBand…added to S&P/TSX Small Cap Index.


    Production averaged 10,204 Bopd to TransGlobe during August, up from 9,395 Bopd during July. Production, during the first 12 days of September, has averaged 10,644 Bopd (8,012 Bopd in Egypt, 2,632 Bopd in Yemen).The average production for 2010 is expected to be at the lower end of guidance which remains at 10,000 to 10,500 Bopd. The exit rate for 2010 is expected to be approximately 11,000 Bopd.

    Conferences Thurs and next Mon
    Peters & Co. Limited North American Oil & Gas Conference
    September 16, 2010
    FirstEnergy Capital Corp. Global Energy Conference
    September 20, 2010

  115. 115
    zman Says:

    Fred Callon speaking now:

  116. 116
    zman Says:

    West – CPE calling their downspaced Wolfberry wells 100,000 barrel EURs with IPs from 80 to 150 bopd. Saying they are getting them sunk for under $1.5 mm for a 40+% return.

  117. 117
    zman Says:

    CPE looking for big growth out of the Wolfbery/Haynesville

    Just onshore:
    2009 about 100 boepd
    2010E about 850 boepd
    2011E 2,900 boepd
    2012E 4,100 boepd

    This would be significant versus 2Q10 production levels of 4,350 boepd, very little coming from the onshore. Look for better notes on this in the morning. If you can’t tell, I’m taking a renewed interest in some small names and this one is probably not one of them but it will be in there as a comp. Maybe I bite but don’t know, these guys are not my normal underpromise and overdeliver kind of guys. Quite the opposite historically speaking.

  118. 118
    zman Says:

    WLT tapping $79.

  119. 119
    West Says:

    CPE….Wolfberry as a general thought most believe that WB can be downspaced to 20 ac and 10 and 5 in some places. All wells are vertical and and better fraccing technology and micro-seismic monitoring is significantly increases production in these wells. As a general rule most companies don’t want to downspace until they forced to by RRC rules because most of the leases contain continous drilling clauses that would be triggered and they would be forced to start a drilling program to hold acreage that had previously been HBP.Oh lucky is the E&P co that has a standard 88 lease form, as most mineral holders lawyer’s lease form is 80 pages and none of it to the benefit of the E&P co.

  120. 120
    RMD Says:

    West, I am hearing about some horizontal tests in the southern part of the Wolfberry. Names which come up are CHK, EOG and EP. Have you heard anything or have thoughts on whether horizontals will work?

  121. 121
    Jerome Blank Says:

    SD, the Sept $5 calls may still have a bit of life left…

  122. 122
    zman Says:

    Thanks JB, any thoughts on WLT?

  123. 123
    zman Says:

    SLB tomorrow lunch speaker at Barclays. Lots of fear and trepidation in the market today regarding possible statements by the CEO, should already be in the stock though.

    HAL speaks there on Thursday.

  124. 124
    Jerome Blank Says:

    WLT, thinking higher…the $NYMO is probably going to be further into overbought territory at the close, so the big red day is looming, but with that risk stated, the intraday structure is suggesting WLT has a shot of at least $80 before Sept expiry….

  125. 125
    zman Says:

    Thanks JB, eco news gets a little more impactful starting tomorrow for the rest of the week as well.

  126. 126
    elijahwc Says:

    Out of my WLLprA Pposition over the last couple of days. Will repositon in the next couple of weeks assuming enough remains outstanding to get back in.

    Here’s why: the exchange offer inducemnt of $14.50 cash in addition to 2.3033 shares of common goes away on expiriation which is uou guess it tommorrow. So stupid not to exchange or in my case sell outright.

    The real news might be what the new owners of up to 7.5illion of new WLL shares will do with them?????????

  127. 127
    zman Says:

    Eli – they’ll probably buy additional shares to fill out existing positions. 😉

  128. 128
    elijahwc Says:

    #127 only if they are a subscriber to Zman with a longer term view.

  129. 129
    zman Says:

    I despise flippers unless I’m oone of them. Beerthirty.

  130. 130
    zman Says:

    Getting on the DBLE call now.

  131. 131
    zman Says:

    RIG talking about taking a job in Egypt as one of its ultra deep water rigs leaves the Gulf.

  132. 132
    zman Says:

    Meanwhile, Interior says drill ban “highly unlikely” to be extended.

  133. 133
    West Says:

    RMD, The Sprayberry is a very thick horizon that has productive porosity stringers 2, 3 up to 10 feet thick that are productive with fracture stimulation from vertical well bore that have produced the most economic ROR. The Wolfberry and with the inclusion of the Strawn will have a vertical section in some places of 1500 feet that is selectively perforated and fracced, to much vertical height to be effectively fracced by a single horizontal lateral. One thought is with new tech and monitoring they will be able to drill multi- horizontal laterals from the same well bore into the most prospective zones of the reservior and frac these indivdually and commingle production…..Truth is that these companies are trying all kinds of new techniques and cutting edge technology and some times it works and sometimes it works but it cost to much to be economical…….In Reeves, Crane and Loving Counties they are drilling Wolfbone wells that are horizontal but as far as I know the Horizontal leg is in the Bone Springs. Maybe horizontal in Bone Springs with vertical completions in wolfberry with mutli stage completions…….The RRC has just now approved the process that you just have to file to commingle production in the Strawn , Wolfcamp, Dean and Sprayberry. Whereas before every application to commingle had to be approved……………..One program that is being watched by all is PXD’s experimental waterflood project in the Sprayberry . If this application can be proved the implications for additional reserves is staggering.

  134. 134
    zman Says:

    Igor now a Cat 4
    Julia a Cat 1
    and the remnants of Gaston should be a named storm in the Gulf by tomorrow.

  135. 135
    zman Says:

    West – thanks for the additional color, very helpful.

  136. 136
    BirdsofpreyRcool Says:

    z — thanks for sitting through DBLE with me. There seems to be a lot of “NAV” value in the stock that the company does it’s darndest NOT to realize. CEO Dole is a good, honest guy… but he sure doesn’t know how to push his stock higher. I would love to buy the preferreds here (like some other smart people on this board)… but have been waiting for them to drop back to $25.

  137. 137
    zman Says:

    He … is … putting … me …. to …. ….sleeeeeepppp. Good assets. Not a fan of Atlantic Rim but I’m looking at that big Niobrara parcel.

  138. 138
    BirdsofpreyRcool Says:

    z — DBLE “Table Top Unit”… did you catch what that is about? Looks like it would be a huge tick up in reserves… but what is it?

  139. 139
    BirdsofpreyRcool Says:

    DBLE — he is an accountant… it shows.

  140. 140
    zman Says:

    Just that it’s in Utah.

  141. 141
    BirdsofpreyRcool Says:

    wonder if it’s subject to another SEVEN YEARS of “environmental studies and permits.”

  142. 142
    zman Says:

    Don’t know, gotta run. Will relisten to it tonight. Will work up a Back of Envelope on it.

  143. 143
    BirdsofpreyRcool Says:

    z — slide 12… would love to hear if you agree with this…

  144. 144
    zman Says:

    Karl formed south of Cuba, course is due Mexico.

  145. 145
    mimster90 Says:

    Legacy Reserves LP Announces Acquisitions of Permian Basin and Wyoming Assets

    MIDLAND, Texas, Sept. 14, 2010 (GLOBE NEWSWIRE) — Legacy Reserves LP (Nasdaq:LGCY) today announced that it has closed three acquisitions of oil and natural gas properties located in the Permian Basin and Wyoming during August 2010, and has recently entered into an agreement to purchase additional Permian Basin oil and natural gas properties, for a total of $14.9 million. Legacy has funded or will fund these acquisitions with cash on hand and borrowings from its revolving credit facility.

    These properties produce approximately 220 Boe per day, of which 79% is oil and natural gas liquids. Legacy estimates that these properties contain approximately 1.0 MMBoe of proved reserves, of which an estimated 76% are located in the Permian Basin and 93% are classified as proved developed producing. Upon the closing of all of the aforementioned acquisitions, Legacy will have acquired approximately $173 million of oil and natural gas properties during 2010.


  146. 146
    mimster90 Says:


    Mike Linn Excutive Director sold 761,000 shares over the last 2 days, he still owns 557,000 shares.


  147. 147
    TEXWS6 Says:

    You sound like you know your way around W. Texas.  We should talk.

  148. 148
    West Says:

    http://info.drillinginfo.com/urb/wolfberry/ Know your Wolfberry and unconventional plays blog. The PXD report tells a lot about the different types of plays being pursued in the Permian Basin.

  149. 149
    RMD Says:

    West, thank you.  I will be trying to extrapolate this info southeast into Crockett cty to try to sync it with some rumors.  Anything you hear about horizontals down there, or PXD's waterflood would be very useful.  Hint: I own  AREX.

  150. 150
    zman Says:

    Listened to TRGL – interesting, will write something up soon.

    SSN presentation on the tape. Noting that it calls the transaction about a $76 mm deal, which is above the high end of the range discussed by $2mm. Will put other new data in the post for the morning.

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