Thursday – Oil Review, Gas Preview + WLL and other comments

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Market Sentiment Watch: Spent looking after an early month rally. Volumes for the most part remain substantially thinner than year ago levels. Today's ecodata data may help to set a more positive tone. In Energy land, we have another busy conference day at Barclays.  

Ecodata Watch:

  • Jobless claims came in at 450,000 vs forecast of 460,000,
  • We get Philly Fed at 10 am EST (F = 0.0, last reading was -7.7)

In today's post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Stuff  We Care About Today – WLL, Barclays Today
  5. Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $5,200
  • 100% Cash
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $4,700
  • 2% Cash
  • Yesterday’s Trades:
    • Added (50) more HAL $32 September calls (high risk trade) for $0.08 with the stock at 30.90, off about 1.5% on market weakness this morning. Expecting positive comments out of them tomorrow at Barclays but I will take out this risky bet on any good move in the group.

ZLT (Zman Long Term portfolio)

  • KOG - Adding back some of the stock sold higher for $2.94. See comments in today's post for reasoning, now through year end should see a significant ramp in production, perhaps more than they have already stated and up to 7 well announcements. Cost basis for KOG in the ZLT is now $1.36.

Commodity Watch:

Crude oil fell $0.78 to close at $76.02 yesterday after the EIA reported a pretty decent set of numbers. This morning crude is trading off 60 cents.

  • Crude Imports Watch: Tropical Storm Karl is disrupting exports from Mexico, look for discombobulated numbers there in the next 2 weeks. This storm has a good chance of rapidly intensifying once it crosses the Yucatan, and running afoul of the majority of Mexico's production which is located in the Bay of Campeche.

Natural gas closed up $0.029 to close at $3.995 yesterday. Late season resurgent heat and the threat from the tropics is responsible the recent smallish rally in natural gas, probably along with technicals. This morning gas is trading up five cents

Natural Gas Preview: I'm at 90 Bcf for today's storage number.

  • Last Week: 58 Bcf Injection
  • Last Year: 67 Bcf Injection - Degree days were roughly the same last week as they were a year ago.
  • 5 Year Average: 79 Bcf Injection
  • 10 year Hi: 101  Bcf Injection
  • 10 year Low: 63 Bcf Injection

The Street is at 95 Bcf.

Oil Inventory Review 




Stuff We Care About Today

WLL Notes From Yesterday's Barclays Presentation

  • I did not get a lot new out of their presentation, all remains steady as she goes, so I'll lay down some quick metrics and tidbits as a refresher.
  • TEV of $5.3 vs 275 mm BOE proved (81% oil) = $19.45 / BOE, not expensive, not cheap, just average.
  • Plan - Stay within cash flow this year and next ... people like that these days.
  • Lewis & Clark

    • The big news on the horizon for the simple reason that they now has 225,000 net acres in this play and if the next set of wells are successful, this opens up and to some extent derisks a new core area for them.
    • If successful, they will ramp the rig count here from a current 5 (2 higher than I thought was the plan) and potentially going to 9 if the new wells turn out as expected.
    • 1st well fracced, rate not yet reported
    • 2nd and 3rd wells will be fracced by month end and results will be released then.
    • Currently thinking 500 potential locations.
    • Completed well cost of $6mm, working to get to $5.5 mm
    • EUR thinking is 350 to 500,000 BOE each.
  • Montana:

    • They added 90,000 net acres last week in an area they are calling Starbuck
    • Cost of this was less than $300 / acre.
    • This would potentially be a 4th core area some time down the road.
  • Sanish Field

    • This is an old mainstay for them with probably the second best core area results (after Parshall) in the Bakken seen to date.
    • They are talking about adding a 3rd Bakken well in their 1,280 (2 section) units in some parts of the field, a so called wing well, where they don't have an adjoining 1,280 acre unit where they could drill across the unit line. This would add about 100 Bakken locations at Sanish in the lower third of the field.
    • Prior thinking had been for a total fo 241 Bakken wells in the field and 141 Three Forks wells so the addition of 100 more Bakken wells is not insignificant, especially considering the gross per well EUR average of 850,000 BOE.
    • WLL also indicated they may be upping the number of Three Forks wells in the units from 2 to 3 in part of the field as well.
  • Bakken IP Commentary

    • The following table show the IPs and Cumulative production of wells drilled in 2010 in Parshal --and Sanish this year. If your average well is producing 78,750 barrels in the first 3 months, you are doing things right. In fact, at $75 oil, that's just under $6 mm in pre royalty revenue for a well that cost an average of $5 mm to drill.  By the way, 97.6% of their fracs to date have gone off without a problem, that is a good (high) number.

  • Other Stuff:
    • Niobrara.
      •  They drilled a couple of wells back in 2009 in their Hatfield Prospect, one vertical and one horizontal. The horizontal had lost circulation due to an unmapped fault. The vertical had nice shows in the Niobrara.
      • They now have 60,000 net acres in NE Colorado prospective for the Niobrara. I think they will drill another two horizontal wells here in early 2011 or even lat 2010.
    • Bone Springs - legacy Permian, adding acreage now, don't know what time frame we are talking about to spud new wells but assume that it will be early 2011 as well.
  • Nutshell: It's cheap and hitting on all cylinders in the Williston and I didn't even comment on enhanced oil recovery programs in Oklahoma and Texas. Sanish sounds like it is going to see quite a few more wells than at last official comment. They have a definite release date for potentially catalytic news on Lewis and Clark at the end of the month and did I mention that it's cheap, how cheap? Try 5.1x and 4.2x 2010 and 2011 EBITDA respectively. 


Today at Barclays

Other Stuff:

  • Boots and Coots shareholders approve merger with HAL
  • PXP - to keep oil at 50 to 60% of total production, to grow reserves by 15 to 20% per year next 3 years and production by 10 to 15% over same period, 2011 capex falls $0.1 B  to $1.0B, plans to close divestitures by year end.

Odds & Ends

Analyst Watch:

  • NFX - Pritchard starts at Buy
  • MHR - BMO starts at Outperform, target $6

181 Responses to “Thursday – Oil Review, Gas Preview + WLL and other comments”

  1. 1
    zman Says:

    EOG Notes from Barclays

    2011 – Crude and NGLs will be 63% of production, up from 23% in 2007 and all via the drillbit.  Of the liquids, 75% will be oil.

    2012 – Liquids targeted to be 68%

    Good point on gas breakeven costs on slide 7

    Growth forecast – unchanged  2010 up 13%, 2011 up 19%, 2012 up 21%

    Eagle Ford Shale:

    2 recent wells

    2075 bopd + 200 bpd NGLs  + 1.4 mmcfgpd

    1365 bopd + 200 bpd NGLs + 1.4 mmcfgpd

    Those are very good wells, should shut up some of the recent comments regarding their EFS wells

    shot 3D seismic over entire 505,000 EFS acres


  2. 2
    zman Says:

    EOG Notes 2

    Papa says their wells are performing exactly as expected at the April analyst conference, there has been no degradation of the results. They also have the 3D in hand and said they found a new 20 mile long fault block,  He's shocked by the underwhelmed action on the part of the sell and buy side. Says they have potential of 900 million barrels here. Says this is the biggest discovery in 40 years onshore, says only 1 deepwater discovery bigger. He also said people are making a mistake by trying to extrapolate RRC data. 

  3. 3
    ram Says:

    So is the EFS the next Bakken?

  4. 4
    TEXWS6 Says:

    RE #2:
    Z, I assume Papa was referring to the EFS when he said it could be the biggest onshore discovery?

  5. 5
    zman Says:

    TEX – yeah and I had to step away. It's been awhile since I heard Papa get pissed off at the Street for the bad info on his play.

    Ram – yes, bigger for EOG than the Bakken will be but that is not news as much of EOG's 580K acres in the Bakken is Bakken Lite.  Recall the used to call it 80 mm barrels total for the longest time. Now it is up to a potential reserve size of 420 mm boe for them, vs again, 900 mm boe for the EFS.

  6. 6
    zman Says:

    PXP call starting in 3 minutes

  7. 7
    bill Says:

    1 to 2 b for divesiture closer to upper limit

  8. 8
    elijahwc Says:

    Pritchard on MHR this a.m.  Lots of binary events next 1 1/2 months
     "Hosted a luncheon and call yesterday with Gary Evans, CEO and Brad Davis, Sr VP of Capital Markets, in our New York office. Key takeaways-the frac job on the company’s first operated Eagle Ford well in the oil window of Gonzales County commenced this past monday. The second well, in Atascosa County, has been drilled and cased and has an October 5th frac date; the third, also in Atascosa, is drilling, and the fourth is expected to be drilled in a different area of Gonzales as part of a new 50/50 JV that the company should provide details on shortly, with both companies combining their acreage and MHR being the operator. MHR is working on another EF JV in Atascosa. In the Marcellus, a horizontal rig moved in this past weekend to drill the laterals on the company’s first 2 wells, which are located in Tyler County, WV. The wells are expected to be fracced in October. The next Marcellus well is slated to be drilled in Washington County, Ohio, where another operator is believed to have tested a well at 19 MMcfe/d. The company plans to have an announcement after the close today on its Marcellus pipeline JV, with the partner a large MLP that can deliver third-party gas and gas processing, ethane marketing capabilities, and upfront liquidity to MHR. The company plans to divest several conventional assets over the next 6 months- Cinco Terry in West Texas (RMD?) and East Chalkley in South Louisiana, for which combined MHR hopes to net $35 million, and 600-700 high cost wells in Kentucky. On the financing front, the company continues to draw on its perpetual preferred facility, which now has ~$25 mm drawn with $100 mm of total authorization. Capex in 2011 is expected to be at least $100 mm, (50% EF, 35% Marcellus) vs $55 million in 2010. Further acquisitions in its 3 core areas are likely"

  9. 9
    zman Says:

    PXP – trying to idle our gas business and get the crude oil biz going. What a statement after JVing into the Haynesville near the peak.

  10. 10
    zman Says:

    EOG running pre open.

  11. 11
    elijahwc Says:

    #8 remember that there is not one booked bbl or mcf from any of the above….yet

  12. 12
    bill Says:

    9 lol and now they are getting out of some very nice gom assets at the low
    Interesting , he said it would be sold as 2 packages deep and shallow
    Shell already has 50 % of tahiti
    You would have to think exxi and mmr would want to add to their shallow. Do they piggy back and also sell?
    who knows but it will be interesting

  13. 13
    PackMan Says:

    EOG moving up pre market

  14. 14
    ram Says:

    Thanks ZMAN.  EOG seems to be trading at a discount to their Bakken and EFS play and you get everything else for free.  Talk about a neon sign that says "Buy me, I'm quite the bargain."

  15. 15
    bill Says:

    110 wells waiting to come on in the haynesville, wow!

  16. 16
    zman Says:

    Front and Center Watch

    SSN – for an end of week strengthening into the closing on the 20th, not much of a concern other than I am still overweight here, but I don't care much about the day to day trading. We didn't back off much on "sell the news" last week as we are still near the high. Note that ORRI is not in my NAV.

    EOG for an exit on the calls

    WLL ditto

    WLT  ditto

    HAL speaks later today at Barclays – 100 $32 Sept calls held now, looking for a better day there but market not helping at the moment.

    HK – talk about no one cares land. They present too today and I think this is becoming a value play that no one is paying attention to. Well hedged but still outspending cash flow so again, no one cares. They generally grow reserves at the same rate as production or better. Given that, in 2011, look for them to come in with big reserves shifting their TEV/Mcfe level from among the higher names in the group to among the lower. Gee what a nice acquisition they would make for a forward thinking large cap … I'm talking to you DVN.

  17. 17
    zman Says:

    Ram – well put.

    Bill – yeah, getting stacked up. Will be interesting to hear Aubrey later.

  18. 18
    zman Says:

    EOG should be in a good "strong gets stronger position" today should the market re-rally.

    PXP – still listening, interesting but I'm not going to play with them.

  19. 19
    zman Says:

    PXP – trying to keep as much upside as possible on the ultra deep. Doesn't sound like they are selling that part of the Shelf.

  20. 20
    zman Says:

    Analyst Watch:

    Lazard downgrades EOG, DNR, CXO to Hold, COG and KWK to Sell.

  21. 21
    zman Says:

    HAL speaks in 10 minutes.

  22. 22
    zman Says:

    Total reversal on EOG despite the fact that they refuted what has been dropping the stock. Reversal is on low volume and on the apparent brainless chopjob by Lazard. If anyone has that report I would be happy to chop it to pieces.

  23. 23
    ram Says:

    What is moving WLT?

  24. 24
    zman Says:

    Ram – Nothing that I have seen so far today, maybe it is the technical breakout, eh Jerome?

  25. 25
    bill Says:

    I heard straight sale of ultra deep and keep upside on the shallow

  26. 26
    BirdsofpreyRcool Says:

    bill — "ultra deep" on the shelf?  or ultra-deepwater?  thanks.

  27. 27
    zman Says:

    HAL call started.

  28. 28
    RMD Says:

    9 and 12 are Reason #1 to ignore PXP…unless he decides to sell it.
    Lots of HS wells waiting to come on (bill's #15) maybe one reason gas prices stay flattish;  did anyone hear what XCO had to say yesterday?

  29. 29
    tomdavis12 Says:

    Z: Can you tell who else may have a piece of that 20 mile long fault block in EFS. I always thought that the second largest leaseholder in EFS was HK. Are they in the NGL section of EFS? They get NO credit for being there.  

  30. 30
    DrLink Says:

    Citigroup with update on LINE

  31. 31
    RMD Says:

    MHR and Cinco:  I'll check and report back.

  32. 32
    zman Says:

    Tom – Probably not, they didn't divulge even the counties that I heard.

  33. 33
    tomdavis12 Says:

    Z: Tom Ward said yesterday that he does not expect NG prices to rally in '11 because of one word. Haynesville.

  34. 34
    zman Says:

    re 33. Now he tells, lol, now that he's an oil company.

  35. 35
    tomdavis12 Says:

    Z: Its all about being a spin doctor.

  36. 36
    zman Says:

    HAL  – Outlining some new tech, ESTMZ – single trip completions on deepwater wells, cuts completion time by 42 days, nice when you are paying $500,000 per day for the rig.

  37. 37
    bill Says:

    26 i dont know the distinction ultra deep" on the shelf?  or ultra-deepwater but if i had to guess id say deepwater
    deep to me means Freisan, Lucius
    the shallow is
    flatrock, bbe,davy jones, lafitte
    He said cash on the deep which leaves open other than cash on the shallow, right?
    I heard in the exxi prsentation that exxi and mmr have a right to buy them out if they parcel it out but not if total package- so im unclear if the shallow is a package or does mmr and exxi have refusal rights. Im sure they would like to add to flatrock, dj,bbe
    see page 3

  38. 38
    bill Says:

    i think shell has the other half of this one

  39. 39
    zman Says:

    HAL –

    Iraq –  4 IOC contracts in place (Shell, ENI) .  More contracts on the way.

    Interesting Slide 18, on unconventional (shale) plays, showing the cycle shortening between discovery and development. Shows all the U.S. plays from Barnett foward and they get shorter and shorter. Next frontier is International shales.  Requires massive increase in Servicee intensity, especially in terms of the amount of frac equipment. 

  40. 40
    zman Says:

    Philly Fed at 0.7 vs 0.0 expected, down from 7.7 last read.

  41. 41
    zman Says:

    HAL Notes

    Helped to drive Haynesville drilling days down 55% since inception and well cost by 70%.


    4000 Tcf of shale gas in the US

    12,000 Tcf of shale international.

    75% of the frac horsepower of the world is in the US. Hello opportunity.


  42. 42
    bill Says:

    apc has an interest in lucius pxp has the other half
    At Lucius (Keathley Canyon 875, 50% WI),
    Anadarko announced the interim results of
    a second appraisal well and encountered
    more than 650 net feet of oil pay to date
    in three of the primary targets. Because
    of the deepwater drilling moratorium
    issued by the Department of the Interior,
    drilling was suspended approximately
    2,000 feet above the well’s planned total
    depth with one additional target yet to be
    tested. The company plans to re-enter the
    wellbore and continue its evaluation of the
    Lucius field after it receives the necessary
    permits. In the interim, development
    planning is advancing with preliminary
    front end engineering being carried out by
    an integrated project team.

  43. 43
    BirdsofpreyRcool Says:

    #40 — make that Philly Fed at -0.7 vs +0.5 expected… but up from -7.7 prior.  So, much better, but still slightly negative (and under expectations)

  44. 44
    zman Says:

    BOP – my CNBC feed had it wrong, thanks. The 0.0 was from Marketwatch this am.

  45. 45
    zman Says:

    HAL – Q3 – very little growth, very little margin growth due to some regions offsetting other, then continued international recovery in Q4.

  46. 46
    RMD Says:

    #41 = the TAT story to me.
    PXP slide 6 shows the forward oil curve has very little upslope except at the 2/09 bottom when oil was ~$40 and the forward price ~$60.
    Slide 23 tells me why PXP lagged so long, : it's a HS play, with a bit of CA thrown in.

  47. 47
    BirdsofpreyRcool Says:

    bill — #37, thanks.  There is "deepwater" and "shelf."  You are correct that the "ultra-deep wells" (davy jones, blackbeard, blueberry hill) are "shelf" (even tho they drill to "ultra-deep" targets).  I would love it if the MMR consortium upped their ownership on the back of PXP's sell-down.  However, since there is very little (to almost no) "upside from the ultra-deep drilling program" in EXXI's stock, any money Schiller shoveled out the door in Flores' direction would be dilutive to EXXI shareholders.  Schiller knows this… so, maybe it would be structured as a carried interest, when the wells are drilled.  That wouldn't get PXP any cash for their ultra-deep shelf, but also allow PXP to keep upside (without paying any cash out the door).  If this is what happens, it's positive for the MMR consortium.  But if Schiller hands Flores a pile o' cash for PXP's share of the Ultra-Deep Shelf… i think EXXI stock would fall.

  48. 48
    jy Says:

    At Barclays Conference, Chuck Davidson of Noble just said that "we have received 2 completion permits for deepwater wells from BOEM.  The first had to be submitted 9 times and the 2nd one 6 times."
    Federal Gov efficency at it's finest!  Most of BOEM is confused about what their requiremants are.  You can imagine what we the operators are going thru trying to meet "requirements" that aren't.

  49. 49
    zman Says:

    HAL Q&A

    Margins? – In the US seeing margin improvements, outside US pricing remains competitive, so not seeing significant change in pricing yet (outside of Iraq), sounds like 4Q should show improvement. 

    Horsepower overseas – rolling stock, minor modifications needed to move it from region to region. But they don't see US coming off and the equipment being sent out of country. So that calls for new equipment to be built outside of the U.S.

  50. 50
    zman Says:

    BOP – I heard PXP say they plan to keep their exposure to the ultra deep shelf, including Davy Jones. Unless I just misheard him, I hear regular Shelf and Deepwater get punted but they keep exposure to the ultradeep (DJ plus 8 or 9 other targets).

  51. 51
    BirdsofpreyRcool Says:

    OK, z… although I never trust an Aussie's word in business (but LOVE to go drinking with them!) I just added a piece of SSN.  Liked their presentation y'day.  And they said they were fixin' to do the institutional rounds.  That, plus cash in the door, should put some upward pressure on the stock, methinks.

  52. 52
    zman Says:

    HAL Q&A

    Mexico – Pemex trying to instill some budget deficit after years of blowing their budget. They have shut things down including Chincotepec now, but have proposed a robust 2011 budget. Says security problems in the north (drug cartels) could put a damper on activity. Sounds like it is safer to work in Iraq.

  53. 53
    BirdsofpreyRcool Says:

     #50 — thank you for that clarification.  I think Flores would be NUTS to punt the Ultra-Deep Shelf.  (But he hasn't called for my opinion lately… ha!)

  54. 54
    zman Says:

    BOP – OK, but I was just about to …. just kidding. Also have potential gas asset sales of maybe 5 to 10 Bcfe sometime next 6 months in the Rockies plus more cash next week from closing #2, Bakken news around the corner.

  55. 55
    zman Says:

    BOP – I was distracted during that call, need to circle back and confirm but I am 80% sure I heard that right.

  56. 56
    zman Says:

    End of the alphabet gang having a good day, WLL, WLT.

  57. 57
    tomdavis12 Says:

    Z: Do you get the sense from HAL that they might not be as cyclical going forward. CLB had the same type of comment that business internationally will be BIG.

  58. 58
    zman Says:

    EOG and Lazard. Anyone have access to that. I'd like to have one of my interns jack-slap that guy.

  59. 59
    BirdsofpreyRcool Says:

    z — #58 if it wasn't for Stupid Analyst Tricks, we would have fewer opportunities to buy good stocks at bargain sale prices.  Just my HappyThought for the day… 🙂

  60. 60
    zman Says:

    Tom – yeah, kinda. I mean, there will always be cycles and if gas goes $40 on a global double cha-cha then I have to think that all will not be up and to the right. But yeah, that's sort of what he's saying. Region to region will continue to vary but you keep the oil price up here and certain govt's get themselves sorted out (Algeria has been slow but is getting there, and then of course, the Obamanation in the Gulf gets worked out) and things start to improve on most fronts. Mexico probably at the trough and then up again. They are rapidly moving towards being a net importer if they don't get their act together soon. If they tap into unconventional resources they could stave that off for awhile.

    Mex is the #2 or #3 crude supplier (depending on the month) to the US on oil ya know.

  61. 61
    zman Says:

    103 Bcf.

  62. 62
    bill Says:

    103 yuck

  63. 63
    zman Says:

    NG off a dime.

    BOP – I hear ya re 59 and normally I wouldn't mind but that bugger pulled it in the face of the Barclays presentation without first having seen it as a snub and just before expiry which is just rude.

  64. 64
    zman Says:

    Stocks not really reacting to it even if gas is. Bastardi is calling for the tropical action to transition to a more Gulf threatening pattern in late September which probably puts a floor near here under gas.

  65. 65
    zman Says:

    OAS again trying to breakout.

  66. 66
    tomdavis12 Says:

    BOP: Bot some EXXI today. Still have a dark mo-mo side to my personality.

  67. 67
    BirdsofpreyRcool Says:

    MMR and EXXI both looking perky… wonder if it's a Relief Rally over the thought that they might increase their Ultra-Deep ownership with no cash upfront.  That is my wish/hope/dream… so, talkin' my position here.

  68. 68
    BirdsofpreyRcool Says:

    tomdavis — that's what makes successful traders… why try to catch falling knives.  I can tell you from way too many yrs of experience… OUCH!
    Also, EXXI stayed up in NYC and is continuing to make the rounds today.  They have a good story to tell… so imagine they are getting some attention.

  69. 69
    Dman Says:

    VTZ – I have shares in ECU Silver (ECU) and Silvermex (SMR), which have done nicely of late but still depressed on a 3 year chart. I figure this is either an opportunity or a bad sign. Any thoughts on these?

    Separately, a couple of larger gold names, AUY and KGC have broken out of long term downtrends & look like they will play catchup to the GDX. Seems like an options opportunity to me.

  70. 70
    ram Says:

    I was hoping HAL would maintain a positive bias.  It appears to have fallen off a cliff.

  71. 71
    zman Says:

    30 cents. Not a cliff but it fell with the market and with the gas number and maybe with the closing statements at Barclays.

  72. 72
    ram Says:

    Correct, not exacxtly a cliff unless you have only a day and a half.

  73. 73
    BirdsofpreyRcool Says:

    ram — didn't you add to your KOG position in the sub-2.75s?  Just tryin' to look on the bright side of things.

  74. 74
    zman Says:

    CHK presentation in 2 minutes. Go Aubrey, time to curtail in a big public my man. Doubt it happens.

  75. 75
    zman Says:

    Looks like the CHK call is not being webcast.

  76. 76
    choices Says:

    z-EOG I called Lazard and tried to BS my way into getting a copy of the report but to no avail-routed around to a number of ciphers but the bottom line was that I was not an institutional client, therefore no report.
    Appreciate your sentiments on the timing of this.

  77. 77
    zman Says:

    Listeing to the EXH call instead.

  78. 78
    Nicky Says:

    Morning all.  OMG this market is so tedious!  upside cycle should be stronger later today.  I still think we make a new high and then likely a few more days of consolidation/downside into middle of next week before up into later in the month.  Resistance levels remain the same 1128/1131, then 1137.
    Looking at oil.  Down every day this week, right?  Should find support here and the move down looks  corrective.

  79. 79
    zman Says:

    RDC as a potential target of Seadrill postulated on Reuters.

  80. 80
    zman Says:

    Morning Nicky – was thinking same on oil, corrective after a good little bounce. Inventories say it has no business getting all rah-rah just yet. Non US drivers however remain strong. Sub par imports to the US but big time cheating on OPEC's part (by 2 million bopd) tells you that Asia is taking volumes in a big, record way.

    Thanks for your thoughts on the broad market. Do you think we get another late day rally due to yesterday and today Fed buys and money still on the sidelines. ETF stories out in the last couple of days are pretty telling about the 3 to 4 pm EST rebalancing and the volatility around it from the now 1,100 ETFs out there being a dominant force in late day trading. Story said S&P now 81% correlated to itself, that's a record high. So the stocks are essentially matching the index. Fewer counter moves seen.

  81. 81
    Popeye Says:


  82. 82
    zman Says:

    Choices – thanks, I am trying to get a copy still, will let ya know if/when I do.

  83. 83
    VTZ Says:

    RE 69 – I love Kinross but it's been my biggest underperformer, I think that now that the RBI deal is mostly behind them it should move up.. I don't know enough about ECU or Silvermax to comment. My silver plays have primarily been SLW and FR.

  84. 84
    tomdavis12 Says:

    Z: Nice call on KOG. Who is better than you? RIG can not pay dividend because of suits against company is a very simple but not complete answer. Issue will be resolved at 2/11 board meeting.

  85. 85
    elijahwc Says:

    For the interns, the Lizard shorthand on EOG is a revision of the price deck coupled with a "I don't believe your guidance".
    "Lazard Capital Markets: EXPLORATION & PRODUCTION: The New Normal for commodities: DOWNGRADING COG and KWK to SELL, CXO, DNR, and EOG to HOLD  [Contact: Equity Sales Desk – 800-223-4080]
    If you are hoping for $6 natural gas, why not $110 oil? We estimate the marginal
    cost of natural gas at $5/Mcf and the marginal cost of oil at $80/Bbl, which underpin
    our valuations and stock recommendations. In our view, a move in natural gas prices
    to $6 from current levels is the same as a move in oil prices to $110, levels above
    marginal cost and fundamentally unsustainable. Yet, we believe many buy- and sell-
    side analysts continue to value E&Ps on a $6/MMBtu price deck, which will only
    prolong the pain of regression in E&P valuations to more realistic levels.
    Lazard Capital Markets: EOG: DOWNGRADING to HOLD from BUY as lower commodity forecasts challenge oil shift strategy  [Contact: Equity Sales Desk – 800-223-4080]
    Downgrading EOG on challenging outlook for 2011. We are lowering our 2011
    oil and natural gas price forecasts to $75/Bbl WTI and $4.50/MMBtu HH from
    $80/Bbl and $5/MMBtu (see our industry note released today, “The New Normal
    for commodities…”). On our new estimates we believe EOG will be hard pressed
    to deliver on multi-year production guidance issued at its April 2010 analyst day."

  86. 86
    BirdsofpreyRcool Says:

    re:  Lazard downgrade of EOG… analyst still has a 12 month $135 PT on the stock… if +46% expected return over 12 months is a "hold"… wonder what his "buys" are expected to return?

  87. 87
    Dman Says:

    V –  I also have FR  & no complaints there. My SLW will be called away this Friday, so I'll have to look for a new entry point. Or maybe just close my eyes and buy.

  88. 88
    zman Says:

    Eli – Thanks much.

    Paragraph 1 – that is gobbledegook and not true.

    Paragraph 2 – that is a knock in the wake of their 2Q numbers. I think it is unwarranted/dimwitted but there ya have it. At the risk of repeating myself, these are not over promise and undeliver guys over the long term. I don't expect prices to rise substantially next year. Neither does EOG. As such, I don't see them blithely reiterating past guidance knowing they will have to cut it. They have said they will outspend CF this year and probably next year and will have asset sales to close the gap.

  89. 89
    zman Says:

    re 86 = LOL. No kidding. 46% return in 1 year too sucky for ya?

  90. 90
    Dman Says:

    Z – 2 million bopd cheating? So much for any spare capacity then. Is there an article on this somewhere?

  91. 91
    zman Says:

    Dman – I think last I saw was 1.98 mm bopd over quota for the group of 12, not counting whatever Iraq is doing since they aren't subject to quota at the moment. This story shows it to be 1.955 in August:




  92. 92
    zman Says:

    BOP – you see the BEXP senior deal?

  93. 93
    zman Says:

    Listening to LINE call now.


  94. 94
    zman Says:

    LINE Notes

    Granite Wash could double the production of the company in 5 years.

  95. 95
    BirdsofpreyRcool Says:

    BEXP — nice high yield offering… upped from $250mm to $300mm and pricing at par to yield 8.75%… about half the proceeds will be used to take out debt that is almost 1% higher coupon.  The issue is rated by Moody's at Caa2 and S&P at B+.  (LOL.  Bit of a diff of opinion between Moody's and S&P). 

  96. 96
    zman Says:

    LINE Notes 2

    90% hedged through 2013 on the downside, but 65% with ceilings so they have more  upside than downside.

    They are now working on 2014 to 2017 hedges

    On the distribution, they are looking to not only increase it but to increase the coverage ratio as concurrently.

  97. 97
    zman Says:

    NBL – down almost 2%, fall off more please. Only thing on the tape is the comment above about slow deepwater permits.

  98. 98
    zman Says:

    Thanks much BOP.

  99. 99
    BirdsofpreyRcool Says:

    Man… if you don't have any really near-term catalysts, this mrkt will talk about you like you're a dog!  Little EGY, getting kicked to the curb.  That's OK.  I am patient.

  100. 100
    zman Says:

    Hear ya on that BOP, ZCAT is quiet, no trades, all cash. Market overwhelming catalysts other than for a day or two at the moment.

  101. 101
    zman Says:

    LINE call ended, says the bond market is waking up to the growth at the company despite the fact that those holders have no claim on said growth. Very positive call there.

    Not sure if APC lunch speech is webcast, checking.

  102. 102
    andy Says:

    bop  – the BEXP notes avail to public?  exp date?

  103. 103
    zman Says:

    BEXP = due 2018 but the pr says they aren't registered.

  104. 104
    BirdsofpreyRcool Says:

    andy — like most high yield bond issues, the SEC can't move fast enough, so the company issues under 144a rules in a "private placement."  These bonds probably have "registrations rights," so will be registered within (usually) 190 days.  But for now, us normal slobs are locked out.
    You can thank the SEC for making you feel So Much Safer!  ha.

  105. 105
    zman Says:

    Going for a run, back in 30.

  106. 106
    Nicky Says:

    So much for me thinking oil should find a low!  Its being crushed.  Don't really get it when the rest of the commodity complex is so strong and the broad market is not that weak. 

  107. 107
    BirdsofpreyRcool Says:

    Enbridge is fixin to restart it's Line 6A pipeline (oil sands, Bakken ==> Chicago).  That is — at least partially — why crude is down.  And why I just bought EEP (yielding over 7.8%).

  108. 108
    Nicky Says:

    Thanks for that BOP.  I would be surprised if oil does not see a bounce tomorrow at least.

  109. 109
    BirdsofpreyRcool Says:

    Hope so, Nicky.  Thank you!

  110. 110
    zman Says:

    Bop – yeah, same reason WLL is so strong today, 10% of their total production (or about 6,000 bopd) gets out of the Williston via Enbridge.

  111. 111
    zman Says:

    Hello KOG profit taking.

  112. 112
    zman Says:

    EXXI and MMR trading days to run.

  113. 113
    zman Says:

    WLT now looks like a full fledged breakout.

  114. 114
    BirdsofpreyRcool Says:

    EEP about to hold a press conf at 1 EDT.  To talk about the spill and their response.  Expect them to announce Line 6 will be back in biz tomorrow.  Might be a good short-term trade??

  115. 115
    zman Says:

    Senate passes the "small business" bill, creating $30 B lending facility. It's not more debt availability that I see small business wanting but whatever.

  116. 116
    zman Says:

    BOP – probably, not my area so I'll take a pass. WLL was saying Friday yesterday by the way, they had it from the company, so there is some sell the news potential too. But I'm just babbing as far as that idea goes, don't know pipes from pear trees. 

  117. 117
    BirdsofpreyRcool Says:

    It's a bizzare way to put more money into "community banks."  You know, like the ones Maxine Waters husband owns.  Go figure.

  118. 118
    BirdsofpreyRcool Says:

    Y'know… these bills all sound so good… "stimulous"…. "infrastructure"…. "small business lending."  Actually, I said at the time that if the original stimulous was spent (invested) correctly, it would do some net good (like China and their stimulous).  But, the Devil is in the Details.  Or in the Democrats, more likely.  Almost all that money was spent on pet projects, consumption, and for pay-backs to various constituancies.  Why does anyone think this "Small Biz Lending" will be any different?
    The definition of insanity, people.  This stuff all sounds good… but it doesn't turn out that way.

  119. 119
    zman Says:

    NG back up over $4 on a cloud pile off Africa that just emerged and which is forecast to track west.


    Karl is now a Cat 1 storm in the Bay of Campeche, no threat to U.S. production, but will mess up imports and could be trouble for Mex. infrastructure.

  120. 120
    zman Says:

    EOG all over the map today.

  121. 121
    elijahwc Says:

    Bidding KOG right here at 2.96.  Too much of a give away today.  Will scale every penny down. 

  122. 122
    elijahwc Says:

    Well that was quick…2nd trance total missed 2.95 now 2.94 LOD

  123. 123
    BirdsofpreyRcool Says:

    Actually, i just like owning EEP so i can say "eep!" all the time.

  124. 124
    BirdsofpreyRcool Says:

    elija — i caught the falling EEP knife too… averaged down… still paid $52.45 on average.  EEP!

  125. 125
    zman Says:

    If we're right about their prospects, "8ths and quarters won't matter"

  126. 126
    zman Says:

    VQ tapping $19, waiting on a pullback there too.

    NG at $4.08 on those storms. We should get a much smaller injection (no holiday and it is hot here) next week.

  127. 127
    BirdsofpreyRcool Says:

    z — fwiw, i think there is a decent chance we have seen the lows in nat gas for this year.  End of sept can be a tad volatile, but overall, the trend should be up and to the right.

  128. 128
    zman Says:

    HK call in about 10 minutes.

  129. 129
    elijahwc Says:

    Got my 2.95's now.  Didn't want to miss any Rosary beads while I'm doing penance. 

  130. 130
    tomdavis12 Says:

    Z: WLL is using EOG's rail line to offset Enbridge. One thing Volker said with great conviction was that if WLL gets smacked after the quarterly numbers because of lower revenue due to Enbridge, that would be a buying opportunity. I will be keeping some ammo just in case.

  131. 131
    BirdsofpreyRcool Says:

    elijah — just walk around the office saying "eep, eep" a couple of times.  It always makes you feel better.
    Did anyone ever met an Oceanography professor from USC by the name of Don Gorsline?  He used to do just that.  And he was one Happy Guy.  (I'm not making this up.)

  132. 132
    zman Says:

    BOP – I think the lows are mid $3's so basically agree. I think we waffle about between about here and there for some time. Shoulder season after next week will bring some big injections so we will need spinners headed across Florida or coming up from the south and into the Gulf to support gas prices at current levels.

    Tom – he's not wrong. Pipeline disruptions generally receive a "get out of jail free" pass from the Market.

  133. 133
    zman Says:

    re 131 – that's akin to Trader Vic's smile all out at the ceiling.

  134. 134
    elijahwc Says:

    "eep"…its going the wrong way.

  135. 135
    BirdsofpreyRcool Says:

    "eep, EEP"… it's not!  (and smile)

  136. 136
    zman Says:

    Don't see a link to the presentation for HK at Barclays, presentation is here:


  137. 137
    zman Says:

    Reading HK presentation. Got any updates on CIGX?

  138. 138
    ram Says:

    BOP, correct, lower with you and a little lower with someone else and of course much lower a while back.  In fact I believe it was you that brought this here to analyze and feast upon.  Thanks to all who took part.  In no way blah blah blah blah blah……………………

  139. 139
    zman Says:

    HK Notes:

    HK calling the benefit of their restricted rate Haynesville program potentially as much as a 30% boost to EUR. Probably early to quantify as such just yet but that is more than I remember them saying before, very significant boost to reserves. Again, these guys are going from looking expensive on last years' reserve tally to cheap on this years' set of coming numbers.

    Also slowing the IP/ restricting the rate, allows them to defer adding more compression in the field.


  140. 140
    BirdsofpreyRcool Says:

    CIGX — nothing solid until they report 3Q.  By then, will have 90 days of test sales.  They don't do conf calls… wonder if they will this time.  Seems like it would be a terrific idea. 
    Meanwhile, people who have tried it have reported all sorts of (positive) side effects.  It seems to work as an anti-inflammatory too.  I have decided to take 4 a day, spread throughout the day.  Have no idea if it was the CigRx, but had a very "zen" mountain-biking experience yesterday.  And minty-fresh breath to boot!

  141. 141
    BirdsofpreyRcool Says:

    yay, ram!  Tasty Treats are what we live for.  🙂

  142. 142
    Popeye Says:

    BOP I bet it was the cannibis, being a hard core "roadie" I know about you mountain bikers.

  143. 143
    zman Says:

    HK Notes 2

    at Black Hawk piece of the Eagle Ford, mostly in Dewitt, they have 53,000 net acres and are calling EURs 500 to 750,000 BOE per well, that's better than Bakken Lite. I don't think that is new but it struck me as worth pointing out, for such a gassy company. Those BOEs are condensate, not oil, but it beats gas.

  144. 144
    zman Says:

    HK puts total resource potential of their 370K net acres in the EFS at 13.9 Tcfe … nice when compared to the 2.75 Tcfe they have booked as a complete company (EFS, Haynesville, Fayetteville, other) now.

  145. 145
    BirdsofpreyRcool Says:

    Popeye… you can't be a roadie around these parts.  The SUVs actually AIM for you on the road.  EEK.
    Not a cannibis user… makes me tongue-tied, if you can believe it.  Frankly, not a pill or supliment taker at all.  Even eschew the daily vitamin.  CigRx is an unusual depature for me.  Big fan o' red wine, tho!

  146. 146
    zman Says:

    HK Notes last

    I think it is telling regarding their plans for the Fayetteville Shale, where they are no small player but they are all non-operated that they did not even give the play a single slide in 30 slides in the Barclays presentation.

  147. 147
    ram Says:

    Being on this board got my 401K back i shape and then some.  The firm I'm with was telling me of the grand mistake in being on my own and focusing on energy.  Now I tell them to Ki$$ my A$$. They're jealous.  In no way blah blah blah blah………………………….

  148. 148
    BirdsofpreyRcool Says:

    ram — that would make a great spot on CNBC.  Maybe you could replace MagicJack! 
    well said.  like the appropriate use of the dollar sign too. 

  149. 149
    zman Says:

    Glad it is working for you Ram.

  150. 150
    ram Says:

    Are you kidding me, if you could fast forward people 3 years and bring them back, this board would be overwhelmed.  It's just the third friday of the month sometimes hurts more than other days.  I guess that's my cycle for discomfort.  I probably should load up on those minty pills.

  151. 151
    zman Says:

    Hear ya.



  152. 152
    zman Says:

    Having trouble with the NFX link, should work, trouble with my browser I think, will listen to replay there.

    Market appears to be awaiting the final hour before doing something.

  153. 153
    RMD Says:

    tidbits from SIMM meeting with DVN:
    ests. 350-450 wells industrywide awaiting completion in HS and EFS;
    target 50% hedge pos,n vs, SDIMM's est of 10% gas and 28% oil for '11.  Mgt unwilling to hedge gas here, may sell foreward oil calls and use $ for
    premium gas hedges (sorta like CHK); mgt "very negative" on HS economics;
    no '11 capx guidance, SIMM expects flat-down.

  154. 154
    zman Says:

    Thanks RMD – wonder why they are unwilling to hedge if they are so negative on gas.

    SSN weekly chart looking very scoopy.

  155. 155
    zman Says:

    This is just in before the elections … no job losses according to the Administration due to the Moratorium. Yeah, right.


  156. 156
    zman Says:

    Barclays needs to step up to the plate at EOG and encourage their clients to get off the sidelines. Company gave the exact EFS defending presentation as expected, and Barclays was pumping the name to buy at about higher levels last week for this presentation. Lack of sack being displayed there is embarrassing.

  157. 157
    RMD Says:

    GHS  must have listened to DVN: 
    Hey Haynesville, Go Frac Yourself is the titlle of a think piece:  608 HS wells on production, ~500 awaiting frac, pipeline, or testing.  Hence an 80% increase if frilling stops. This equals about $3.5 B of sunk cost before leases.  Production growing even with more wells not being completed.

  158. 158
    zman Says:

    Makes you like the Bakken all the more.

  159. 159
    zman Says:

    TOT remarking that drilling costs in the Gulf are going to rise 20% in the wake of Macondo.

  160. 160
    zman Says:

    Analyst Watch:

    HAL earnings and valuation going up at Wells Fargo, after they listened to the Barclays presentation.

  161. 161
    AAA Says:

    Any idea why CRR is taking the gas pipe today?

  162. 162
    zman Says:

    AAA – nothing that I see but would assume it is something they said at Barclays.

  163. 163
    Jerome Blank Says:

    KOG tested 2nd resistance at $3.25, a cent short of the 3 box reversal, holding above the 200 day… could get the expected consolidation here before going higher…looks good

  164. 164
    zman Says:

    Been quiet on WHX of late. Currently slipping back over $20. Will have a fresh model marking it to market for 3Q soon. Odd behavior of late given oil prices but they are largely hedged.

    OAS at 18.19, trying to move into a breakout.

  165. 165
    zman Says:

    By the way, was perusing the latest Q for WHX and see that they are still calling for a termination date due to reserve depletion of October 2017. I've read a bunch on the internet about how some folks are thinking its a straightline decline and will be done in 4 years. They have no basis for this claim other than inadequate math skills.

  166. 166
    zman Says:

    Thanks JB. Would you call the WLT move a breakout or not enough for you there in terms of volume?

  167. 167
    ram Says:

    Re 165 – Probably those people and the Lizard folks went to the same school – you never know….

  168. 168
    RMD Says:

    CHK presentation:  financial players and Asians are at the table, in spades..over doing JVs.

  169. 169
    Jerome Blank Says:

    RE: #166 WLT is looking technically good, appears to be poised to close above the recent highs at $80, seems to be a good buy the dip candidate here above the 200 day, just overall question the macro picture on short term swings…grind higher or pullback?  

  170. 170
    zman Says:


  171. 171
    ram Says:

    Here's hoping for a 'Pop" to avoid the 'Pin".

  172. 172
    BirdsofpreyRcool Says:

    ORCL out with an earning beat.  Always a good start.

  173. 173
    zman Says:

    re 171/172. Hard to argue with either, RIM up as well.

    Seeing MEE on the tape with low end of their range guidance, will take a look for the post tomorrow. Could be good for other coals.

  174. 174
    zman Says:

    TXN ups dividend and announces $7.5B buyback.

  175. 175
    choices Says:

    I have no idea what happened with the EXXI 10's but I show a closing on IB of 113, with a low of 103 for the day of 103.

  176. 176
    choices Says:

    CUSIP on EXXI 10"s is 29276KAC5
    They may have been called but I cannot find out at this hour-will try tomorrow.

  177. 177
    BirdsofpreyRcool Says:

    choices — think you saw (or IB mis-quoted) a quote for the EXXI 16th due 6/14.  They closed at 113.8.

  178. 178
    BirdsofpreyRcool Says:

    oops… make that the "EXXI 16s"

  179. 179
    choices Says:

    IB mis-quote as I only have one EXXI in IB portfolio-still up with incorrect quote-will call IB tomorrow-pulled up quote on EXXI 16's and IB has the identical quote for them.
    Thanks BOP-sorry for the false alarm-by the way, what is the call price on EXXI 10's if it is handy-I will double check with IB tomorrow if not handy.

  180. 180
    zman Says:

    Bastardi is pretty good. As he said yesterday, expect Karl to spin up into something bad before landfall in Mexico. Weather services had Karl as a Cat 1 to the coast. Now its offshore and a Cat 3.

  181. 181
    BirdsofpreyRcool Says:

    choices — re EXXI 10s, no worries!  LOVE those bonds.  They are currently callable at 105 and marked at 103.75 on TRACE..  The call price drops down to 102.5 on 6/15/11 and 100 on 6/15/12.  I think EXXI will redo it's capital structure around that time (summer 2012)… call the 10s and the 16s and refi at lower rates.  They will have Davy Jones production on line by that time.   

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