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Market Sentiment Watch: Market sitting on hands. Futures are up this morning on positive news from techland last night but off their best levels and I expect a boring, expiry influenced trading session today.  

BP Spill Watch:

  • Relief well intercepts discovery wellbore at Macondo. Good job to the guys driving that bit.
  • Cementing comes next, should be a done deal.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today- LINE, NFX
  5. Odds & Ends

Holdings Watch ZCAT (Zman Catalyst portfolio)

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

ZIM (Zman Inefficient Markets portfolio)

  • $3,800
  • 3% Cash
  • Yesterday’s Trades:
    • None

Commodity Watch Crude oil fell $1.45, presumably on the near term reopening of import capacity to the U.S. via Enbridge's line, to close at $74.57 yesterday. I expect crude to hold the $70s and probably the mid $70s now through the OPEC meet and greet in October. This morning crude is trading flat.

  • OPEC Watch: Algeria's oil minister said oil prices "could be better" and said OPEC will work on that at the coming meeting. OPEC is not expected to raise quotas any time soon.

Natural gas rallied $0.07 to close at $4.06 yesterday despite a slightly bigger than expected injection to storage and because of increasing fear over tropical activity in the Gulf now through the end of the hurricane season. This morning gas is trading up 3 cents.

  • Tropics Watch: 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. Another cloud pile coming off the coast of Africa is getting ready to congeal into a storm early next week. 

Natural Gas Storage Review

ZComments: Injections have been running high to my model and the Street. I'm not surprised this week as there was a holiday and the weather isn't what you would call firm but the high rate of supply is evident in these numbers. Yesterday's injection of 103 Bcf actually took out the high for this week in history, after having ridden the low end of the range in previous weeks which is curious but again I'd point to the holiday and its often unpredictable impact on industrial demand. From here to the end of injection season should be about 8 weeks and I still expect storage to top out in the range of 3.75 Tcf which should keep gas close to the $4 mark in the early winter months until we are sure what kind of season we are going to have. The current forecast still calls for milder than normal weather in some of the most gas heating intensive parts of the country but those models this far out are often wrong.  My sense is that gas will not post significant gains for at least the next 9 months but also that is not far off the medium term lows at current levels down to $3.50.

I'll have a couple of new graphs including some demand data here next week.

For Now, The Usual Graphs...



Stuff We Care About Today

LINE - Some More Thoughts

  • Granite Wash volumes could double the production of the company in 5 years,

    • from 2Q levels of 256 MMcfped (roughly balanced at 56% natural gas in 2Q but liquids will be over 50% going forward)
    • 2010 exit rate is seen at about 300 MMcfepd (3Q mid point guidance is 280 MMcfepd and they nearly always beat the mid so it sounds like the 300 MM/d will be surpassed handily during 4Q if not sooner given their completion schedule in the Wash) .
    • Looking at the results to date (four wells by them, many more by industry), and their acreage position (4 wells announced as completed but likely 7 on line now with another 100+ remaining locations to drill on 48,000 net acres), as well as their base decline rate on long lived assets, this goal seems readily attainable.

      • Note that the 100 locations is in the Texas side of the play, in and around the Greater Stiles Ranch area that NFX and others have popularized. They have not yet quantified their potential on some 25,000 acres in Oklahoma, just east of the Colony Granite Wash where CHK is busy drilling.
      • That 100 locations figure also only includes 1 lateral per drilling unit. This too is likely to change as this is a stacked pay play, with as many as 10 productive zones adding additional upside to the play.
    • Based on their hedges and reserve estimates, these are >100% IRR projects
    • Their rig count here is 2 now going to 3 in 4Q and 4 in 2011.
  • Wolfberry:

    • 2 rig program drilling about 100 wells per year,
    • 400 locations with more if/when they downspace
  • 90% hedged through 2013 on the downside,

    • Note that their collars are lopsided, with 90% protection on the floor prices
    • but they are covered for only 65% on the ceilings so they have more  upside than downside.
    • They are now working on 2014 to 2017 hedges
  • Distribution:

    • Their capital program is only reinvesting about one third of EBITDA. Their budget is simply not expanding as fast as their EBITDA.
    • Expect the quarterly number to rise 2 to 5 pennies with the next quarterly announcement
    • Look for the new distribution just prior to Halloween.
    • They see expanding both the dividend and the coverage ratio concurrently.
  • Valuation:

    • TEV to EBITDA 8.9x 2010 and 7.4x 2011 EBITDA  (based on Street estimates for EBITDA of $696 mm and $836 mm for 2010 and 2011 respectively. Despite the growth in 2011 EBITDA, I suspect given their hedges and the newer organic growth angle that the 2011 numbers are too low.  This is not cheap on traditional E&P metrics but on that basis, the name has always traded rich due to the yield.
    • Current yield is 8.2%, probably goes to 8.5% near term.


NFX Highlights From Barclays

  • Keep spending within cash flow
  • Grow 2010 volumes at 10% but domestic oil volumes at 30% (Monument Butte, Williston)
  • Bakken update
    • very nice list of wells of late on and just west of the Nesson Anticline,
    • IPs from 1,300 to 3,816 BOEpd
    • 271,000 net acres, including 55K net over in Montana in the Elm Coulee area where EOG, BEXP, ZEnergy, Slawson and others are starting to poke around.
  • Not a lot of incremental news on the Eagle Ford or the Alberta Bakken plays - expect that to change later this year.
  • Hedges are strong, 65% of expect NG hedged next year with flows just over $6.20; 40% of 2012 at 5.42.

Other Stuff:

  • CXPO management getting a big slug of $0 shares and not even, at these prices, keeping all of those? Wake me up when it falls below $2.
  • Tuesday's, Wednesday's and Thursday's posts have been archived on the Reports tab in the Conference Notes section at the bottom of the page for future reference.
  • The EGY Brief can be seen on the Reports tab or here. I will extend this report in the near future.

Odds & Ends   

Analyst Watch:

  • EOG upgrades at Credit Suisse to Neutral
  • Credit Suisse also trimmed a number of E&P price targets as it revised it's 2011 natural gas  by 13% to $5.25.

159 Responses to “Friday”

  1. 1
    BirdsofpreyRcool Says:

    [put this on last night's post… answering choices question…]
    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. 

  2. 2
    BirdsofpreyRcool Says:

    Credit market a-buzz with comments that High Yield is back to par.  New issuance is being met with a feeding frenzy and new issue bonds are trading up over 2 points at issue.  That is drawing in the bond flippers and further churning the waters.  So far, new bond issues are not coming with ligher covenant packages… but that would be next.  So, we are at the perfect point for companies to do something in the debt mrkt…. then turn around and put that to work in the equity mrkt… debt is cheap, equities are at a low valuation (like, issuing debt to buy back their own stock or do acqtns).  This love of fixed income will push bond spreads tighter, until the point where the risk premium is wrung out and investors will start to move from bonds to …. you guessed it… equities!  That will cause US Treasury yields to climb, producing a negative total return in that market… but will cause the stock market to really SCOOT (as shorts rush to cover and longs rush to invest).
    Could be quite the bond-fire this Fall.  Anyway, pick your favorite horses, take your place at the gates.  This race, she is gonna begin… maybe not today.  Maybe not next week… but, setting up for 2011 to be the Year Investors Rediscover Equities, methinks. 

  3. 3
    zman Says:

    Thanks BOP, great points, enthusiasm.   As one of my buds who is starting a new money running shop said about two weeks ago, "do you really want to be buying bonds now, at their all time, all time, all time high?!

  4. 4
    BirdsofpreyRcool Says:

    It's a good idea to have some corporate bonds in your portfolio.  It's just that I would buy invidual bonds and ladder the maturities.  I would NOT be in a bond portfolio.  Think the total return for those will be negative next year.  Corporate bond spreads will continue to tighten… but the underlying US Treasury yields will back up.  The good news is that Money Market funds will finally pay more than zero.

  5. 5
    zman Says:

    Front and Center Watch:

    NOG deep in the money calls need to come off the table

    EOG and WLT at the money calls as well this morning

    SSN should see a drift higher into Monday's closing #2, which if the recent presentation is a good indication (and the last one was) should be at the top or maybe just above the top end of the range.

  6. 6
    zman Says:

    BOP – yeah, agreed, he wouldn't be in a fund of them either.

  7. 7
    BirdsofpreyRcool Says:

    thanks… meant to say "I would not be in a bond FUND…"  but you got the meaning.

  8. 8
    zman Says:

    Futures almost back to even.

  9. 9
    BirdsofpreyRcool Says:

    For us buy-and-hold (at least for a while) types, I am going to look at down days as Bargain Shopping Days. 

  10. 10
    zman Says:

    WLL reguiding for 3Q volumes to account for Enbridge effect. Goes to just under low end of 3Q range but full year guidance remains unchanged. Dip, if any, should be brief on that kind of thing.

  11. 11
    BirdsofpreyRcool Says:

    KOG — nice buy y'day, z.  Eep, eep!

  12. 12
    zman Says:

    S&P gaining sharply here, energy not keeping up so far.

    MCF looking strong of late.

    The baby Bakken players (NOG, KOG, OAS) as well. 

  13. 13
    ram Says:

    I get a sense that E&P's want to run, but they are pulled back by the 'Pinning' gravitational forces.

  14. 14
    zman Says:

    re 11 – thanks, I think 2.94 has been my highest buy in there to date, definitely pulling back from my bored/tired comments from a couple of months back on those guys.

    Morning Ram – agreed.

  15. 15
    BirdsofpreyRcool Says:

    Unless something really weird happens, looks like I get to keep the 50¢ premium on those E21 22.50 calls I wrote on my trading shares.  Will probably look to write October calls… it's nice to have the incremental income, while we wait for news. 

  16. 16
    zman Says:

    EXXI set to chalk up another 5 month high today. News in the near term at Davy Jones.

  17. 17
    BirdsofpreyRcool Says:

    #15 — this is a strategy that tomdavis uses successfully… and it really an under-rated strategy (my me, at least). 

  18. 18
    zman Says:

    Re 15, yeah, nice to knock your cost basis lower and lower.

  19. 19
    zman Says:

    EOG having trouble yet again, show some spine Barclays.

  20. 20
    BirdsofpreyRcool Says:

    EOG really getting knocked upside the head with the Ugly Stick.  Credit Suisse went out on a limb this morning and raised 'em to "neutral."

  21. 21
    zman Says:

    Citi – out saying LINE will not increase the distribution in the near term. Um, that's not what it sounded like on 2 calls I've been on in the last two weeks. Maybe I'm being hasty in saying it is likely to happen with the coming quarter's announcement in October but I think it is a very real possibility given the new acquisitions and organic growth they exhibiting. That and they keep saying that after a long hiatus they will be getting back to growth of distribution mode. Maybe they mean "some day" but it sounded more urgent and they could afford to do a 3 cent raise now ($0.12) per year without pushing coverage to the low end of the historic range.

  22. 22
    tomdavis12 Says:

    Z: Did you see The CSFB comments re EOG? Your boy Wolffy is concerned about tight service envoirn in EFS and is expecting EOG to have to lower their near term oil volumes. PT $97

  23. 23
    BirdsofpreyRcool Says:

    EGY — trading below my recent add price of $5.35.  So, z, just to discuss this a little… you're hanging back here b/c 1) no near-term catalysts, and 2) their (rather stupid) comment that they might use their Cash Stash to enter the Bakken?  I think point #2 is the reason the stock fell off here… can't argue with waiting to see what happens.  But, they have shown restraint from over paying in the past… let's hope they can hold onto that discipline, as they watch the Cash Pile grow.

  24. 24
    zman Says:

    Tom – they went over why that wont be on the 2Q call. He's certainly no my boy or he'd be praying for an extension of unemployment benefits.

  25. 25
    BirdsofpreyRcool Says:

    U of Mich Confidence Index — not.  Expected 70, got 66.6 vs last month 68.9.
    666… seems somewhat evil to me.

  26. 26
    zman Says:

    BOP – basically yes. I put the brief on them on the reports tab with the note that it would be augmented soon. I like the basic story. I don't want to see someone like that get into the deworsification game. Stick to your core abilities. If you are a shallow water exploitation player with core strengths in developing fields off Africa via FPSOs and you are already incredibly oily, then I really don't want to see you prospective in the shale plays where you have no expertise in fracs or shale logistics. Seems like a costly way to waste money to me and their cash pile is nice. I'd rather see them look at offshore assets unless they can really scoop something and take talent along with it.

  27. 27
    BirdsofpreyRcool Says:

    #26 — thanks.  Totally agree with your logic there.  My Inner Strategic Manager just groaned… when I heard they were thinking "Bakken." 

  28. 28
    zman Says:

    WHX inching higher. Their Whiting production comes from a variety of older fields. I don't know if any was impacted by Enbridge, but don't think it would be directly.

  29. 29
    zman Says:

    BOP – that banker they had speaking basically said, "heck, we'll do anything" which doesn't mean what it sounds like but its not something you say from behind a podium.

  30. 30
    BirdsofpreyRcool Says:

    to add to #27… did NOT think the stock would get hit this low, however.  Thought we would see it stop at $5.50.  So, my bad.  But, still holding. 

  31. 31
    BirdsofpreyRcool Says:

    OT (b/c it's Friday) — used this little sell off to take a new position in AINV.  Like yield vehicles with equity upsides…

  32. 32
    PackMan Says:

    2011 as the year investors rediscover equities ?   19 straight weeks of net withdrawals from equity mutual funds and counting.
    No disrespect, but I think not BOP ! 

  33. 33
    PackMan Says:

    Doesn't mean the market can't go up; just saying …

  34. 34
    zman Says:

    EGY for CPE. Now if that were to happen it would make logistical sense and maybe they could help with some of CPE's offshore stuff that could be some day economic again (don't know if they still have control of the TA'd Entrada project which was killed by falling prices in late 2008)  and it would get them a proper capital structure. It would probably make you cringe though.

  35. 35
    PackMan Says:

    Wassup w/ EOG ?

  36. 36
    choices Says:

    #1-Thanks BOP for comments-IB has it right this AM-unusual for IB but not unprecedented-

  37. 37
    BirdsofpreyRcool Says:

    PackMan — your comment is backward-looking.  And also is part of the set-up for 2011.  But this is what makes markets… we agree to disagree.
    I'm looking at the credit market and where I think corporate bonds and USTs go in 2012.  Think the relative value investor will be looking to move some money outta those asset classes… so, there is some "push" aspect to my comments.  People will be pushed into equities, as other asset classes aren't as attractive.

  38. 38
    zman Says:

    re 35. Downgrade at Lazard yesterday, expiry, soft market, upgrade today to only a Neutral, fear they will have to cut their oil volume forecast because they were below guidance there last quarter (1Q they drilled a lot, 2Q they completed a lot (less production), 3Q they produced a lot) … at least that's Papa's story and he's sticking to it. They just posted 2 of the best EFS IPs to date in the play yesterday … apathy towards them rules at the moment.

  39. 39
    PackMan Says:

    saw the comment on the Credit Suisse up to neutral, so down $2+ on options expiration.
    dunno, I'll take a crack at some traders for the day here …. maybe back to $90 for expiration.

  40. 40
    tomdavis12 Says:

    BOP: To back up your 2011 comments. The third year of a presidential election cycle has averaged up over 11.34%/yr going back 80 years. The only third year downs were '31 (depression) and '39 (start of WWII). The other three years have not averaged over 5%. FWIW  

  41. 41
    zman Says:

    Watching NBL fall back off here, getting more interested.

  42. 42
    PackMan Says:

    and what is holding BEXP down these days ?

  43. 43
    Jerome Blank Says:

    EGY 200 day SMA support at $5.10, on a P&F buy signal in X's…added charts

  44. 44
    BirdsofpreyRcool Says:

    PackMan — totally understand, if you (and everyone else) doesn't agree with me.  If I was always right, I'd be sitting on my own island right now…. but at the very minimum, I would think about getting out of any Fixed Income Bond Fund I was in… and rolling the proceeds into invidual bonds with laddered maturities.  Just my thoughts.  Worth what ya pay for em!

  45. 45
    BirdsofpreyRcool Says:

    FWIW, i think options expiry day is one where you look for good buys (or sales) on stocks you follow.  Don't think the day has much over-all information content.  That said, it can be fun (and profitable) to cruise for pricing anomolies.

  46. 46
    zman Says:

    re 42. That's tougher. I think:

    1) they set the bar too high with their continually press released rise in IPs

    2) IPs have flattened out in recent releases… still strong but what have you done new and exciting and in a big way for me lately?

    3) hot money liked 1) but hates 2)

    4) Montana results were OK but not the blockbuster of Rough Rider and Ross. Very economic down to $50/barrel but people in 3) want bigger better always.

    5) Their Three Forks test at Rough Rider was later than expected which causes worry. There are a number of TFS tests that look good on and around their acreage so no reason to think it won't work.

    6) and maybe this should be first, they committed the sin of upping their budget at 2Q.

    I hold the common but don't want to play calls until I see a heart beat. Long term I like the assets they have pulled together. I would like to see more emphasis on cumulative production as WLL is reporting and not just the no longer so sexy flush IPs.

  47. 47
    PackMan Says:

    BOP; all I am saying is that the data is overwhelming that "investors" are a vanishing breed as there is enormous distrust in the stock market.  That sentiment will be very hard to change, as a 70-80% rally off the Mar 09 lows shows, even that could not prevent investors from taking their money out.
    Now, that of course can change as time goes by, but from where we sit now, I don't see it — you might have some asset allocators shifting money around, and yes the bond rally has been rather, er, robust.
    We'll just have to see … I am of course not even close to being always right.

  48. 48
    zman Says:

    BOP – could not agree more re expiry day.

  49. 49
    BirdsofpreyRcool Says:

    JB — thanks for #43.  I just might add some EGY trading shares, if it dips to $5.10 or so.  Will go vote now!

  50. 50
    PackMan Says:

    Thanks Z.
    I am in some EOG and BEXP for short term trades; hopefully just for today.

  51. 51
    Jerome Blank Says:

    #49, BOP, thank you much…KOG's really holding up well, CIGX looking perky,…
    WLL holding up, RIG showing a lot of strength

  52. 52
    BirdsofpreyRcool Says:

    PackMan — i'm just tyring to look forward, and think about the Relative Value Game (and where we are in the credit cycle).  Policy has kept this recovery from happening sooner.  But, with the debt mrkt where it is and with companies sitting on piles o' cash (and issuing debt to do equity-friendly moves), I think money flows where relative value shows.  And the UST and Corporate Bond Trade is pretty much peaking out.  So, where is that money gonna flow??  I think 2011 will look a lot like 2006… and 2012 could look like 2007.  We might even have a 4th quarter like 4Q04… History repeating/rhyming… just sayin'

  53. 53
    choices Says:

    EOG Volume heavy-couple of 25000 blocks came thru @10:24 AM-go figure

  54. 54
    zman Says:

    GST – BOP or Reef, have they ever talked about potentially selling the Marcellus?

  55. 55
    cargocult Says:

    BOP-off topic but you mentioned business development companies for yield. I own TICC and ARCC for yield and profit. Been good to me so far. Also own PNNT. Love those dividends.

  56. 56
    BirdsofpreyRcool Says:

    z — GST.. nope.  Not that I have heard, anyway.  But they know they need to do deals there (given the fragmented acreage position).  Reef… you hearin' anything there?

  57. 57
    elijahwc Says:

    Truely strange thought of the day.  MHR made of point of saying that two Eagle Ford JV's should be announced shortly.  Now I find this flashing past on Briefing.  Could it be?
    "Ticonderoga says while presenting to investors yesterday in New York, Chesapeake Energy reaffirmed its pending joint venture transaction in the Eagle Ford Shale, indicating an announcement date in the next 30 days. CHK has 600,000 net acres in the Eagle Ford, 85% of which is in the oil section of the play. The firm anticipates the Eagle Ford JV to be structured similarly to CHK's other JV arrangements."

  58. 58
    BirdsofpreyRcool Says:

    cargo — thank you for the head's up there.  Yes.  Looking for yield vehicles with upside into where we are in this cycle.  So, appreciate the suggestions.  I'm meeting with AINV mngt at the end of this month, so (hopefully) will know more then.  But think the time is right for those types of stocks.  Dividends are wonderful things.

  59. 59
    zman Says:

    WLL up after cutting 3Q but maintaining full year guidance. Get out of jail pass in effect there.

    SWN  starting to take it on the chin as Street cuts 2011 NG price decks.

  60. 60
    zman Says:

    Re 57 – makes sense it will be a big player, and CHK likes JVs of size though, don't know if MHR qualifies.

  61. 61
    1520sbroad Says:

    SWN also had lawsuit in PA announced late yesterday. Fouling wells with drilling fluid. Not good headlines for them on any fronts.

  62. 62
    zman Says:

    BP getting no lift from intersecting the wellbore.

  63. 63
    zman Says:

    Thanks 1520, was it a surface spill?

  64. 64
    1520sbroad Says:

    that would be water wells in #61. SWN starting to look cheap. Likely to get cheaper though.

  65. 65
    elijahwc Says:

    BOP – "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."
    Maybe we need to add a voluntary exchange offer for the Cvt Pfd's (EEXXF) a la WLL's big cash inducement up on their WLLprA's this week.  Issue is currently around 205.  CFO has got to hate looking at those every day.

  66. 66
    1520sbroad Says:

    Press release said it was related to a well SWN drilled in 2008 says high levels of barium, strontium and managanese found after drilling of a well in Lenox Township. SWN has denied charges after doing their own investigation.

  67. 67
    Jerome Blank Says:

    ATPG looks really good on the daily, probably not enough movement today  to save my Sept 12.50 calls 

  68. 68
    RMD Says:

    re GST:  CHK's presentation on Bossier suggested huge reserves, but development is a ways off, " Bossier represents a huge "gas bank" for shareholders".

  69. 69
    BirdsofpreyRcool Says:

    elijah — don't remind me about those EXXI perpet convt perferreds.  We railed on the CEO at the time they were issuing those… to no avail.  His i-bankers said it was a "cheap source of capital" at the time… and Schiller believed them.  What his i-bankers failed to mention, is that it was a cheap source of capital to the I-BANKERS at the time.  Schiller was told he would live to regret issuing those.  Hate being "right" sometimes.  I shoulda gotten even and bought the sh*t outta those converts.  But, bought the common instead.  Those converts aren't callable until Dec 2014.  But don't think EXXI will have to cough up cash for them… just force conversion.  In the meantime, all you who bought those perpetual convertible preferreds — enjoy the ride!  And Nice Job!!

  70. 70
    RMD Says:

    CHK also said, I think, that EFS partner was international.

  71. 71
    zman Says:

    RMD – If only they could string 5 deep Bossier wells together instead of 1 every 6 months or so maybe they'd be able to grow production. Sure would like to see them announce some Glen Rose oil in the 2nd well as well.

  72. 72
    zman Says:

    re 70. Yeah, that would make sense given their history.

  73. 73
    BirdsofpreyRcool Says:

    RMD, thanks for the GST comments — if it was just about the bossier and marcellus, i'd pass.  But, you add in the potential for liquids from the Glen Rose and EF and you've got a cheap, cheap stock.  Problem is, you're gonna have to wait for a while, to get results from the GR and EF at GST.  But when (if) that stock scoots, it's really gonna SCOOT.

  74. 74
    BirdsofpreyRcool Says:

    Totally OT… but, wow.  A Reserves friend just sent me this…
    An Ode to the US Marines.  Wow.

  75. 75
    ram Says:

    Oh, Off Topic = OT.

  76. 76
    BirdsofpreyRcool Says:

    CIGX — guess there is an effort afoot to "pin" the stock at $2.  Kinda fun to watch.

  77. 77
    bill Says:

    pxp redux
    i just replayed yesterday presentation.
    Back to BOP question, they are packaging it as off shelf and on shelf. Regarding on shelf, they said their bankers suggest selling it as a package but they want to structure the deal to keep upside of mmr prospects.
    So how do you sell something but keep upside? an ORRI that kicks in after what certain amount of production or return or flat %.
    They said strong interests an indicating 2 b in cash.
    How would you feel if huge international player came in and bot it. Would that be favorable to MMR?

  78. 78
    skimo Says:

    z, Why does SSn continue to stay down below $1.30? Seems to me that it should be on an uptrend based on fundamentals.

  79. 79
    BirdsofpreyRcool Says:

    if a huge ANYthing came in and bought PXP's shallow shelf stuff…
    … it would be Tie Me Kangaroo Down, Sport, for MMR and Pals.

  80. 80
    BirdsofpreyRcool Says:

    …. and hopefully, they don't announce anything like that today.  Don't want to lose my EXXI trading shares to that $22.50 call buyer!  πŸ˜‰

  81. 81
    bill Says:

    heres the link
    i added some more pxp

  82. 82
    zman Says:

    re 78, Best guesses:

    1) 6 months ago it was less than half this price. People have made good coin and are flipping out of new found gains.

    2) The reason for the latest move is the Niobrara sale (probably 80% of it at least) and that is about done.

    3) It's a single digit midget so people distrust big moves

    4) Results in the Niobrara have been somewhat mixed by offset operators. It's still early in the play.

    It's building a base here with down days on lower volume that up days. Tailing volumes and a flag formation are often a good thing. It needs time to diget the recent move.


    I get a near term (next 3 to 6 months) of $1.90. The market probably will discount that by another $0.25. Next catalysts after closing #2 are more Bakken area results, a JV in the remaining Niobrara acreage, and the sale of Rockies gas assets. Somewhere along the way we may have a Texas exploration target drilled as well and the acquisition of another small slice, maybe 6 sections, of Bakken acreage.

  83. 83
    zman Says:

    Bill – they could simply sell all the Shelf lease blocks and production and keep the blocks with DJ and the other 8 to 12 prospects under them.

  84. 84
    elijahwc Says:

    MHR/CHK JV illusion:  Damn, it does appear to be Int'l as Reliance is rumored on the prowl.

  85. 85
    bill Says:

    let the lawsuits begin

  86. 86
    ram Says:

    Re 82 – How about the possibility of finding operators when they need them versus waiting in the back of the line?

  87. 87
    Nicky Says:

    Morning all.  My preference if todays' lows can hold or thereabouts is that an e down for wave iv of an expanding triangle has played out.  If this is the case then the target area for v is between 1135 and 1140.
    But unless oil can move up I don't hold out too much confidence.  I am struggling to understand why oil has become detatched from the indices all week.
    Something has to give.  Either oil needs to bounce or the market to fall.

  88. 88
    zman Says:

    Ram – I don't think that is a concern in this stock at the moment. Maybe a bit on the Bakken in terms of completions but they are so small that it really isn't where the story is at. In the Niobrara, it's too early for that. They are doing seismic now and won't spud the first wells until 1Q or 2Q11.

  89. 89
    ram Says:


  90. 90
    zman Says:

    Re 85. Talk about the wasting a perfectly good and very expensive well. The bottom kill is unnecessary and the well could be sold to the next operator of the block. Or we could just waste it. Sheesh. Why not produce it and distribute the proceeds to the Gulf Coast fund. After all, BP early on said all recovered oil proceeds from this well would go to a wildlife relief fund, can't believe congress wouldn't take the opportunity to steal the well.

  91. 91
    bill Says:

    chk has done a nice job finding jv partners
    any guesses what 20 % of efs would go for 120,ooo acres
    1.2 b??  6000 an acre?

  92. 92
    zman Says:

    Depends on oil vs gas window. Will be over $3,000 an acre for sure.

  93. 93
    skimo Says:

    Z, thanks for the great overview. 

  94. 94
    zman Says:

    Skimo – thanks, let me know what you like specifically and I will endeavor to do more of that.

  95. 95
    elijahwc Says:

    Not bad for a tag end asset picked up in the bankruptcy of Triad (Marc Shale acreage)
    From Pritchard: MHR announced yesterday that it has entered into a Letter of Intent with DPM to form a 50/50 gathering JV in West Virginia and Ohio. The total cost to complete the initial gathering pipeline facilities is ~$35 mm with MHR and DPM funding ~$12.5 mm and ~$22.5 mm, respectively. DPM will also pay MHR $5 mm at closing for certain rights of way MHR is contributing. Once the initial facility is constructed the future capital requirements will be split 50/50. The takeaway capacity of the proposed pipeline will be ~200 MMcf/d. Phase 1 of the project is expected to have ~20-30 MMcf/d of takeaway capacity and be completed in Q4 10. MHR expects to flow its first two horizontal Marcellus wells into the pipeline in addition to providing capacity for other operators in the vicinity where gas is currently shut-in due to limited infrastructure. The proposed JV allows MHR to secure firm takeaway capacity in the region while reducing its capital costs. The JV, which is subject to, among other things, negotiation, execution, and board approval of definitive documents, is expected to close during Q4 10. (Berman)

  96. 96
    BirdsofpreyRcool Says:

    Goldman on the tape saying the best returns in commodities over the next 12 months will probably be in energy… and biggest losses in agriculture.

  97. 97
    choices Says:

    CHK-News wire came across earlier this AM to the effect that India's Reliance Industries considering  Investment with CHK-cited as a Bloomberg Report-I do not get Bloomberg service, just the web site.

  98. 98
    choices Says:

    #97-already reported above in Reuters

  99. 99
    BirdsofpreyRcool Says:

    Goldman Predicts Biggest 12-Month Commodity Returns in Energy
    2010-09-17 08:55:51.670 GMT
    By Maria Kolesnikova
    Sept. 17 (Bloomberg) — The best returns in commodities over the next 12 months will probably be in energy and the biggest losses in agriculture, Goldman Sachs Group Inc. said.
    The bank is forecasting a 27 percent advance in energy over
    12 months, a 17 percent jump in precious metals and a 15 percent gain in industrial metals, analysts led by London-based Jeffrey Currie said in a report today. Agriculture will decline 10 percent, the team forecast.
    "For the more cyclical commodities, oil and copper, while continued indications of more supportive policy in the U.S. and China, better macro data in these key countries, and improving commodity data have pushed prices higher within their respective trading ranges, we continue to expect them to break out to the upside in coming months," the analysts wrote in the report.
    The Reuters/Jefferies CRB Index of 19 raw materials fell
    1.7 percent this year, led by declines in natural gas, cocoa and sugar, amid mounting concern about the strength of the global recovery. Crude, gasoline and heating oil inventories reached a 20-year-high last month as the U.S. Commerce Department said the economy probably expanded at a 1.6 percent annual pace in the second quarter from an initially reported 2.4 percent.
    While agriculture is forecast by Goldman to be the only commodity group to drop over 12 months, the bank raised its three-month forecasts for corn, cotton, arabica and raw sugar.
    Goldman increased its three-month corn estimate to $4.65 a bushel from $4.15 and said the market will have a "further tightening" because of demand for ethanol and animal feed.
    Wheat prices, which as much as doubled since June, may decline in the "medium term," Goldman said.
    Coffee Forecast
    The bank also raised its arabica-coffee forecast to $1.80 a pound from $1.55 and raw-sugar to 20 cents a pound from 15 cents. The cotton estimate increased to 90 cents a pound from 85 cents. The cocoa forecast declined to $2,700 a metric ton from $3,100. Goldman raised its live-cattle forecast to 105 cents a pound from 93 cents.
    The bank is forecasting a 19 percent return in the S&P GSCI Enhanced Total Return Index over 12 months. The gauge declined 4 percent this year.

  100. 100
    jiveyjr Says:

    big volume move in CIGX over last two hrs…way to go BOP

  101. 101
    bill Says:

    sd has a ton of basis hedge at 76 cents for the diff between waha and henry
    That spread today is only .08 cents

  102. 102
    zman Says:


    NOG – Sold the September $10 calls for $5, for no gain, with the stock at $15.10. Just closing out remaining Septembers.

  103. 103
    BirdsofpreyRcool Says:

    d*mn… they are trying to come afer my EXXI trading shares!  Sop it.

  104. 104
    cargocult Says:

    Re 90- I wish I had the money. I'd buy that well off BP and get it going again. Their leak is bigger than many companies production.

  105. 105
    tomdavis12 Says:

    BOP: The premiums on the EXXI options have been rising the last three weeks. Part of the reason for my impetuous purchase. But make no mistake open interest is VERY small. 

  106. 106
    BirdsofpreyRcool Says:

    jivey — CIGX is either a moon shot or a total bust.  Not much in between.  That said, shorts can only make 100% if it's a bust… but longs can make multiples.  So, question is, WHY so many shorts???

  107. 107
    BirdsofpreyRcool Says:

    tomdavis — let me know where you intend to fling your Mad Money next.  That was a nice buy!

  108. 108
    BirdsofpreyRcool Says:

    Anyone snag EGY at $5.10?  I have my greedy little claw out at $5.08… and day's not over yet. 

  109. 109
    Nicky Says:

    Z with the front month expiring next Tuesday so you expect them to try and pin it at 70 or 75?

  110. 110
    tomdavis12 Says:

    BOP: You and Z do a much better job at adding to the trading catalyst names. I only play the cautious names. Since I am a covered option guy when markets go bad. If I make money on the EXXI trade some of the profits should go to therapy. That nasty momo side.

  111. 111
    BirdsofpreyRcool Says:

    tomdavis — mo-mo works, in an up market.  You just might want to save those therapy monies until 2013 or so… JMHO, of course.

  112. 112
    ram Says:

    No need for therapy!  Just load un on those tasty, mint, feel good pills from CIGX. πŸ™‚

  113. 113
    BirdsofpreyRcool Says:

    ram — did you get yours yet?  You seem… well… more "well adjusted" lately.  πŸ˜‰

  114. 114
    ram Says:

    No. They are on the way.  I have already have thrown up several times earlier today based on my short term scenario.  So I think it's out of my system.

  115. 115
    ilikericky Says:

    BOP I am learning a lot about fixed income so I hope you dont mind another question?When you buy bonds is the logic to buy below the par value of the bond? and if so how do you work out if its below par value?Also would you know a good beginners bond book to buy?Zman recommended the Non technical Guide Petroleum etc for me which was excellent maby you know of something similar for bonds…thank Ricky

  116. 116
    zman Says:

    Nicky – no feel for now to Tuesday. Guess would be higher, since it's come off most recently but it is acting like lower so dunno. I don't see it tripping through $70 unless we have a big equity sell off. OPEC just around the corner now.

  117. 117
    zman Says:

    Story including oil comments on Cat 3 Karl


  118. 118
    BirdsofpreyRcool Says:

    likericky — bonds (like stocks) are relative value things.  What makes a P/E of a company's stock compelling?  If it's lower than a similar company's P/E (on a risk-adjusted basis).  I like buying bonds below par… but that is not a requirement.  You have to be careful above par, however, as most bonds (at least the ones i play in) are callable.  So, don't want to pay 103 for a bond that gets called the next month at 102. 
    If you intend to buy bonds directly (and everyone should), then you will do so in a brokerage account.  I would start with contacting your brokerage and asking them for either a sit-down meeting and/or literature about corporate bond buying.  The only fixed income books I know about are text books and technical books.  But I got my real education on the bond trading desk.  It's kinda like driving.  You can take driver's ed… but at some point, you just have to get behind the wheel and drive. 
    If you stick to buying bonds of companies with hard assets (like energy), it's tougher to get hurt.  It's all about cash flow and the ability to generate cash.  Unlike stocks, a company HAS to pay their interest in CASH.  So, cash coverage of interest and looking at what the company's overall bond maturity schedule is, is where you start.
    I find bond analysis easier than stocks.  With bonds, it's all about relative value, cash flow, where you are in the credit cycle, and what the company's assets might be worth in a liquidation sale.  With stocks, it's all that… PLUS the upside.  Wtih bonds, you don't care about the upside b/c 95% of the upside always accrues to the equity holders.

  119. 119
    ilikericky Says:

    BOP thanks so much will do that on Monday as its evening here on the other side of the pond….

  120. 120
    BirdsofpreyRcool Says:

    ilikericky — well then, raise a pint for me!  It's my wedding anny today… we were married in Scotland, XX yrs ago.  Lovely, lovely memories.  All the women wore hats!

  121. 121
    BirdsofpreyRcool Says:

    (or, should a say, a ha-pint… it's not lady-like to hoist a pint, eh?  cheers!)

  122. 122
    ilikericky Says:

    Congratulations and will do…

  123. 123
    tomdavis12 Says:

    BOP: Congrats on the anniversary. Hope you get back to Scotland sometime. You are probably better kissing each other than the Blarney Stone. Rumor Friday: SDRL buys PDE sometime in next 4 months. Prediction #2 Merge Monday will hit the energy sector 9/20. If I am wrong, I will start to eat my Zhat.

  124. 124
    redjack Says:

    NBL downgrade:

  125. 125
    ram Says:

    ZMAN – Does it seem like less premium than normal on the EOG OCT 95's?

  126. 126
    zman Says:

    Ram – yeah, given the volatility and the time and the distance, that's not bad, a little better than I would have expected.


    RJ – thanks.

  127. 127
    ram Says:

    I'm thinking of just doing a couple of EOG's and WLL's. Alot more thinking than doing though.

  128. 128
    zman Says:

    EOG – probably not a near term catalyst aside from possible an upgrade lurking out there. GS liked it enough to put on the Conviction List (they really should change that name) back at $100.

    WLL – around month end, maybe +/-5 days you get those 3 L&C wells.

  129. 129
    ram Says:

    EOG did get convicted and got sent straight to the PEN!

  130. 130
    ram Says:

    O.K., sorry, please have Mrs. Z send me an email.

  131. 131
    zman Says:

    If you can catch the Build It Bigger episode on Science Channel on Sakhalin I highly recommend watching.

  132. 132
    zman Says:

    re 129/130 = LOL.

  133. 133
    PackMan Says:

    CIGX:  BOP, from my experience with other low price stocks, high short interest could be due to info leaks.  OR it could be due to pending dilutive financings, particularly if large, controlling shareholders want to gain more exposure at the expense of other shareholders.  Seen it happen far too often; another crooked Wall St game.
    I don't know if any of this does apply in CIGX case; but it could be a factor in the short interest.

  134. 134
    PackMan Says:

    sold out of my EOG and BEXP traders a bit earlier.  Small gains, but ok.  Don't feel like rifing them into 4 pm.  EOG can go up now. 
    If it can break above S2, it just might head to 90 today.

  135. 135
    PackMan Says:

    sometimes the GS Conviction List is a suckers list and a death knell …

  136. 136
    zman Says:

    Been seeing at such this year.

  137. 137
    PackMan Says:

    EOG knocking on the S2 door now and at highest price since before 10 am.

  138. 138
    BirdsofpreyRcool Says:

    PackMan — you are correct, sir.  CIGX will do an equity raise, at some point.  It can do it the "easy way" (if stock trades above $3 for 20 days) and call some (all) their currently-outstanding warrants.  Or they can do it the hard way, issue more shares directly.  Every one of the largest shareholders in this stock, know this is the lay of the land and have factored that into their models/expected outcomes.  They are also well-aware of the rabid short base… so, while the company will try to raise the additional money the "easy way," the shorts will try to keep a lid on the price below $3.
    Interesting dynamic tension.  However, it's Game Over, is the product does what we think (hope) it will do.   

  139. 139
    PackMan Says:

    Well, if the guys that control the company decide to not act in the best interest of shareholders, they will find a way to keep the price low in order to do a low price, warrant heavy, dilutive deal in which they and few others get to participate in.
    Again, not saying this is what happens, I don't know enough, but I have seen this movie before …

  140. 140
    BirdsofpreyRcool Says:

    The largest shareholder of CIGX is the CEO.  So, that gives us a bit of hope, don't you think?

  141. 141
    PackMan Says:

    It should, but not necessarily … depends on who he is and how he operates.   If he is an unethical, greedy, $–t, it could be a problem.

  142. 142
    andy Says:

    bop –  looked at selling the oct EXXI 22.50's , but the premium doesn't seem very good  compared to what we got when we sold the sept ones, so i passed.

  143. 143
    BirdsofpreyRcool Says:

    adding to 140 (and agreeing with what you are saying)… if CIGX has to do a new share issuance, I would expect that round to go to the current shareholder base.  It's what they did last time… when Roskamp bought in and the CEO added to his position.  To be fair, however, it was long before the product launch… so don't think a general share offering would have worked well back then. 

  144. 144
    BirdsofpreyRcool Says:

    andy — thanks for checking!  i think we will get another chance… so, waiting.  But, yes, that 50¢ premium was a tasty snack indeed. 

  145. 145
    BirdsofpreyRcool Says:

    JB — it ain't over ('til it's over)… but your $5.10 bottom call on EGY was not only Spot On, but it was timely!
    Calls like that don't mean much, unless you can post them ahead of time.  Thanks!  (although i got greedy and put a bid out at $5.08). 

  146. 146
    Jerome Blank Says:

    RE: #145 BOP, thank you much for the kind words, I appreciate your comments….

  147. 147
    ram Says:

    What goosed WLL?

  148. 148
    elijahwc Says:

    Z, Anybody, any thoughts on an event near-term in WLL?  I'm having a hard time coming to terms with a stock going straight up that just added 7.5 million new shares of non-natural holders (convert folks) and a remaining convert so far in the money that it should trade right on top of the stock that gave up little if any of the $14.50 pre-exchange extra cash.  

  149. 149
    tomdavis12 Says:

    All I know is that I'm taking back anything nasty I may have said about Volker. Go WLL

  150. 150
    BirdsofpreyRcool Says:

    tomdavis — well… between EXXI and WLL, i'd say you are having an EEP, EEP sorta week.  Nice!

  151. 151
    zman Says:

    Eli – end of the month, three more TFS wells at Louis and Clark. They were supposed to be at 3 rigs now going to 4 in 4Q but are at 5 now and spoke of going to 9 if they like the outcome of these 3 wells. The first has been fracced but data being withheld until they have all three. Two weeks and we should know muchos moro.

  152. 152
    tomdavis12 Says:

    Some of the zbrain beauties had a helluva last hour. Keep up the good work Z and of course you too BOP!  8)

  153. 153
    zman Says:

    thanks  beerthirty

  154. 154
    BirdsofpreyRcool Says:

    nice shades, dude.  thanks. 

  155. 155
    elijahwc Says:

    Did they forget to run this through the spell ckeck?
    As seen below
    fckeditor for wordpress plugin

  156. 156
    West Says:

    WLL…….For those with an interest . Lead story in this week's RMOJ.."Whiting Has First Three Forks Production in Stark County"…The Kubias #11 -13TFH reported to be flowing back at 1780 bo, 1 mmcf and 1569 bwpd. This is from 10k lateral  with 30 stage frac treatment. Frac crew moving 6 miles southeast to frac 2nd well.  WLL is currently drilling offset to Kubias 1/2 mile to the east.This is the first 3Fks production in Stark County. WLL has 51….1280 acre spacing unit in this prospect………………..Initial information to support units supplied to the NDIC before drilling began estimated intial IP of 600bo/480mcfgpd with possible EURs of 500kbo and 400mmcfg…….PUT A CHECK MARK BY THAT ON THE CAT LIST………That is a significant discovery well for WLL.

  157. 157
    zman Says:

    Hear ya on that check mark and thanks, they said it was flowing, there seemed to be a grin in his voice but you never can tell. That's going to put them in fast track mode, moving from 5 to 9 rigs here. Another very nice well.

  158. 158
    andy Says:

    z  – just read TRGL is webcasting a presentation in london mon sept 20 at 10 am.  think this might be worth listening to. let me know if u see this.

  159. 159
    zman Says:

    Andy – thanks, I listened to them last, its interesting, nothing I'd call near super near term. but working towards  potentially big things, laying the ground work now. 

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