Thursday – Oil Review and Gas Review Plus

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214 comments yesterday. Close to but not a record but who cares, the quality was high and you have my thanks.

Market Sentiment Watch:  Marking time until the Friday Payrolls report. I was somewhat surprised by yesterday's paltry pullback upon weak ADP statistics. My sense is the market wants to cautiously slog higher as people who've sat out the recent run reluctantly join the fray. My sense also is that we're do a pullback. If not in equities then at least in oil. Yesterday's oil numbers were bullish enough from a products drawdown standpoint to keep crude from immediately faltering but with lower seasonal utilization comes a rebuild in stocks at Cushing and given the proximity to the all time highs there my third sense of this paragraph is that the crude rally in on borrowed time. We may be able to coast into the OPEC meeting on the 14th above the $80 level but if the cartel members just do their usual cup of tea meet and greet and not some serious quota violation control I don't see crude keeping an 8 handle for long.

And Now For Something Completely Different Watch:  Alhambra's comments on the metals markets

Ecodata Watch:

  • Jobless claims came in at 445,000 vs 455,000 expected.

In today's post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Stuff  We Care About Today - a number of things
  5. Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

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

ZIM (Zman Inefficient Markets portfolio)

  • $7,300
  • 51% Cash
  • Yesterday’s Trades:
    • WLL – Sold the remaining October $100 Calls for $3.20, up 151% to my cost basis in that set. I continue to hold the common shares in the ZLT.
    • WLL – Added (5) WLL October $100 calls back for $2.20 with the stock at $100.20 (the ones sold earlier for $3.20 with the stock at $102). Just doing a little trading with the name showing increased volatility and still not having fully discounted the recent news. 
    • MMR – Added (15) MMR $18 calls for just under $0.34 with the stock at 16.70. Higher risk trade but the stock is trading away from the group and this set of options should still provide good leverage to a recovery in the name this week. I continue to own the $17s as well.

Commodity Watch

Crude oil gained another $0.41 to close at $83.23 yesterday after the EIA reported OK inventory numbers for finished products. The crude chart now looks like this In general, the move of up $9 in 7 days has been with other commodities and is not likely something that is sustainable ... the hangover is always worse than the party after these spikes ... at least for equities. This morning crude is trading up 50 cents. 

  • Stupid Is As Stupid Sees Watch: The European Unions energy head is calling for a continuation of a ban of deepwater drilling off Europe until the results of a study of what happened at Macondo are published. He also called on member states to suspend licensing until a new liability regime is established. 

Natural gas closed up $0.12 to close at $3.86. Noise, noise and more shoulder season noise. This morning gas is trading flat.

  • Tropics Watch:  Pretty quiet. Otto formed but he is taking a tour of the Atlantic.
  • A Run Though In Eagle Ford Shale Economics. This is partially borrowed from SM but I'm sure they won't mind as the math is pretty basic even if the concepts aren't on everyone's cocktail party topic list. In short, this is why people like the liquids rich gas plays. When you drill an oil well you get the $80 per barrel or so we are currently at less transportation, costs, etc. When you drill a dry gas well you are looking at $4 less costs. But when you drill a liquids rich gas well you can expect something like the following. Obviously the amounts of gas, natural gas liquids (NGLs) (ethane, propane, butane, isobutane etc) and oil and condensate are going to vary across the play but this would not be an atypical mix.  It's not like drilling an oil well given current prices but it sure beats plain old natural gas. SM made one other point in their presentation worth mentioning. They see a majority of NGLs retaining their historic relationships with crude. This is important since there has been much talk about potentially squashing the NGL economics due to oversupply. 

Natural Gas Preview:

I'm at 80 Bcf for today's storage number.

  • Last Week: 74 Bcf Injection
  • Last Year: 68 Bcf Injection
  • 5 Year Average: 71 Bcf Injection
  • 10 year Hi: 91 Bcf Injection
  • 10 year Low: 41 Bcf Injection

The Street is looking for a 79 Bcf injection.

ZComment: 4 weeks left after today's number in the typical injection season. I continue to plot storage peaking around the 3.7 Tcf mark (probably under it) which should be low enough to support gas prices near current levels, then winter weather will have to take over.

Oil Inventory Review






Stuff  We Care About Today

Johnson Rice Energy Conference Day 3 Schedule

  • CXPO - 11:15 am -  I've been saying I'll take another look $2 but it may not get there. Strong results from their Upper Cook Mountain formation yesterday and results of their first Eagle Ford Shale test later this month.  They continue to busy themselves with the Haynesville and E. Texas Bossier plays and have more near term catalysts there.

  • GMXR - 12:15 pm - They cut guidance yesterday and the market haircut the stock 10% yesterday. Cheap enough to buy? Maybe worth a listen for a trade.

Johnson Rice Energy Conference Day 2 Wraps - these aren't the full stories of course, just the pertinent comments from yesterday's presentations augmented here and there.

EXXI / MMR - News soon; quarter good

  • Productive capacity has been listed in their presentations as 26,000 BOEpd for some time now
  • Shiller said it's between 27 and 28,000 BOEpd currently, expect that to go to 30,000 BOEpd soon
  • As far as the quarter goes, they had no hiccups due to the tropical season, logistics, equipment or the government.
  • Davy Jones 2 may see some pay results by Thanksgiving
  • Black Beard East is likely to have pay sooner, as they running logs now

KOG - Confident Bakken Grower

  • Still thinking they complete 7 more Bakken wells before year end
  • Still thinking they make their exit rate, officially it's 2,500 BOEpd, with current production of 2,000 BOEpd that's a layup.
  • Although frac timing should still be a concern management sounded more than a little confident that its relationship with HAL will see the wells completed and anything short of 3,000 BOEpd is probably going to disappoint the Street.
  • They see 2011 budget at 2x to 3x this year's $75 to $80 mm. The Street puts EBITDA next year at just over $60 mm. They raised $--- mm with the September equity offering so at the 3x spend level there would be a funding gap. 
  • Bank line redetermination underway and they are expecting a bump. Frankly I'd like to see them draw on it to me their capital needs in 2011 instead of further diluting the shareholders. A little debt is not a bad thing.
  • Biggest catalyst on the horizon is probably their 4Q results on a Three Forks well. Nearby successes would seem to auger for the Three Forks to work on their FBIR acreage as well.-


Other Stuff

Quick Read On My SSN Thinking. This was in comments yesterday but the comments ran long yesterday. I included it today only because of that and because Elijah liked it and he's a smart fellow.

  • here's a quick handy way to look at it.
  • At $1.22 the stock has a market cap of $101 mm.
  • Backing out net cash of $63 mm leaves $37mm to cover their Bakken, Niobrara, Rockies Gas and other assets.
  • Bakken – 6 sections with 6 wells (for now) with a net total of 1 mm barrels of oil prices at $15 /BBl in the ground is $15 mm
  • Rockies Gas – 11 Bcfe – call that worth a buck an Mcf  to that's another $11 mm off the table
  • That leaves $11 mm for the rest.
  • $4 mm more coming from CHK soon.
  • Now we're down to $7 mm for the rest.
  • They have 17,000 acres in the Niobrara left
  • They have a 3.8% ORRI in the stuff they sold which CHK is already turning to the right on … no cost to them, just open envelopes with check
  • Now the 17K acres at the price they just received of $3000 per acre would be another $51 mm and the ORRI probably has a present worth of $30+. …. against that $7 mm. Hmmm, seems cheap to me.
  • If you forget the ORRI and the other stuff and just say the market's value of $7 remaining vs the 17,000 acres then those acres are valued at $400 per acre.

MCF Operations Update

  • Exploration well spud in the Gulf of Mexico. Wow, life goes on. Of course this is shallow water but even getting an exploration well spud there is a challenge under the new rules at present.
  • Onshore test shows good rate at 3.6 MMcfgpd plus 15 bcpd in south Texas.
  • Current total company rate is 102 MMcfped with 5 coming from the onshore. This is down 3 MMcfepd from their operations update in mid September. 
  • Current cash is $50 mm; up $4.5 mm since their last update three weeks ago. They have nothing drawn on their $50 mm credit line and given their budget of $82.5 mm and current cash flow it looks like it will be quite some time before they need to tap that line. 
  • Nutshell: I should own it but I don't ... looks like I will as I fund my SEP for the year. The announced well is the first four offshore exploration wells set to spud this fiscal year, good to see them making progress.

Odds & Ends

Analyst Watch:

  • Will add in comments.

165 Responses to “Thursday – Oil Review and Gas Review Plus”

  1. 1
    BirdsofpreyRcool Says:

    Elijah — now we know why there was a bid for your EXXI converts…
    Company is coming after the converts.  Schiller was told when he issued these that he would regret it someday.  But his BANKERS told him it was cheap money.  ha.  "Rue-Day" is here, it seems.
    The larger picture here is that "something" is up.  I've been sniffing around and think it will be big.  And will involve debt and equity and a balance sheet rearrangement (which will be an challenging task… as the 16s have call protection until June 2011).  Anyway, keeps life interesting, eh?  Until proven wrong, i think Schiller is the Anti-Flores.  John has a nose for How To Build Value For Shareholders (and not just himself).

  2. 2
    BirdsofpreyRcool Says:

    Speaking of Flores, a few comments from a well-respected firm in Energy Strategy Space (JSHerold), weighs in with a few comments on PXP…
    Comment 1
    Plains Acquires Shale Acreage From Hughes for $578 Million
    2010-10-06 13:57:16.665 GMT
    Oct. 6 (IHS) — Plains E&P has agreed to acquire approximately 60,000 net acres in the oil window of the Eagle Ford Shale from private Dan A. Hughes Company for $578 million in cash.
    According to Plains, the properties have a net resource potential of 140 to 175 million barrels of oil equivalent and a projected net production capability of 2,000 boe/day, rising to 5,000 boe/day by year end 2011.
    The Eagle Ford Shale is one of the most desirable U.S.
    resource plays, and entry to it is expensive. Using the mid- range point of 157 MMboe of resource potential, the deal then implies $3.67/boe.
    This value is high in comparison to recent transactions, although the criteria for assessing resource potential is normally not disclosed, making comparisons unreliable. The implied value of $9,600 per acre is in line with other recent major transactions, such as Reliance Industries’ joint venture with Pioneer Natural Resources and Talisman Energy’s acquisition of assets from Common Resources. Cost-effectively proving up the resource potential will be critical to Plains.
    Comment 2
    Plains Struggles for Direction, Pays Top Dollar for Shale
    2010-10-06 13:54:31.230 GMT
    Oct. 6 (IHS) — Plains Exploration & Production has lacked a consistent strategic focus over the last several years, which is reflected in upstream investment performance that is among the worst in its peer group.
    Five year finding costs have been over $39/boe, the highest in IHS Herold’s Large U.S. E&P peer group, and it has replaced just 56% of production through the drill bit. Plains three year recycle ratio of 94%is far below the 260% average of its ten member peer group, so the company has turned to acquisitions for growth.
    However, the $3.7 billion acquisition of Pogo Producing in
    2007 brought significant conventional gas assets just before the onset of the shale gas revolution. Then Plains agreed to a $3.1 billion joint venture with Chesapeake in the Haynesville Shale in 2009 that it was unable to fully finance.
    The smaller amended agreement cost Plains considerable acreage and accelerated drilling payments. Now the company is turning to oil weighted assets, but has paid a premium price for late entry into the highly sought after Eagle Ford shale.
    Well said.

  3. 3
    BirdsofpreyRcool Says:

    OT but chapping my butt this morning…
    I have to pay for my OWN health insurance (and until recently) for my employees.  Where is MY waiver????  This is just sick stuff.

  4. 4
    bill Says:

    2, lol kinda what we were saying yesterday
    One thing that bailed them on the Haynesville purchase was 2 years of ng hedges at 10 + and they had puts on oil at 110 that they monetized when oil was 40 which brought in a billion
    No doubt they screwed everything up which is reflected in the price and value stocks are values for a reason.
    PXP really didnt get a move like mmr and exxi did with the deep water discoveries and they havent recd anything from the 51 m shares of MMR they still retained
    So , what does the future hold? Flores says they are going back to roots us land based oil. Has he got religion? Will he change?
    They have a huge position in MMR > 20 % and have upside exposure to oil while the downside is protected with puts and a free option on NG with haynesville
    So putting it all together, i like it at 27. It should be trading 10 higher imho
    BOP thanks for the analyst's comments

  5. 5
    BirdsofpreyRcool Says:

    "Flores says they are going back to roots us land based oil. "
    Hmmm…. Jim Flores got his start with Flores and Rucks… which became Ocean Energy… which was bought by Devon in 2003.  SO…. "land based oil" is not where his roots are, fwiw.

  6. 6
    bill Says:

    robrys at 74 this week, last week he was 70 actual was 74, so his model was 4 light

  7. 7
    West Says:

    Management Comments
    Mr. H.C. "Kip" Ferguson, Executive Vice President of Exploration for Magnum Hunter, commented, "We are pleased to announce our second joint venture in the Eagle Ford shale play of South Texas. Magnum Hunter is continuing its efforts to spread our exploratory risk over a larger number of prospects in the Eagle Ford Shale play. With production results from the Gonzo Hunter #1H (currently producing) and the Lagunillas Camp #1H and #2H (both waiting on frac) to be released in the near future, we remain convinced that Magnum Hunter's continuing efforts in this emerging unconventional play will add significant incremental value to our shareholders

  8. 8
    zman Says:

    Morning guys, had to step out for a new monitor this am.

    From Nicky yesterday:

    So far the strong resistance at 1163 has capped the rally but consolidating up here is still bullish for higher highs. We have support at the 1150 area which doesn’t look like its going to be tested at this rate. There are two minor cycles which are not likely to top for another day or so. The longer cycle is starting to look very extended so its difficult to see exactly how this is going to play out. However I would say I am looking for a higher high between now and Friday and then we likely roll over. If we can get above 1163, then look for 1168,1172 and then 1177.

  9. 9
    elijahwc Says:

    BOP & #1 (kinda goes together)
    Saw that on the EXXF's.  Line & chapter from Wall Street's, Crime and No Punishment.  Reviewing yesterdays submission of:
    "Last Friday I offered out my very smallish EEXXF position @ 223.25  At the time it reflected an earlier trade that I thought was a bad print or odd lot headhanding slightly shy of this level.  See the conversion ratio of 8.77 vs common@ 23ish told me that this deep in the money convert should be trading 20 points above parity……but
    Nothing happened till the call at 3:01 with the fill."
    ….I have one observation.  The desk that got that deal done is the same that could'nt get SDRXP & CIRFP done with a point price improvement.  For days.
    Either I'm not their customer or they are the banker.  Probally both.

  10. 10
    zman Says:

    Thanks West, had not seen.

  11. 11
    West Says:

    MHR will be at Johnson Rice today so we might get some well information on the Gonzo. Joint venture and AMI with private company announced but without many specifics. There is a big chunk of stock for sale at 4.25. If we can get some good news and take out 4.25 convincingly we might get a good move here maybe 10%.

  12. 12
    BirdsofpreyRcool Says:

    Elijah — whaddaya wanna bet that they are the banker.

    Bankers and lawyers… make money no matter which side they take. And they always take both sides. Such is life.

  13. 13
    elijahwc Says:

    MHR “production results from Gonzo”

    Its unlike G Evans to not herald the positive.

  14. 14
    West Says:

    E…#13 agreed

  15. 15
    elijahwc Says:

    BOP I apparently forgot to look around the table and fiqure out who was the patsy so I am. But on EEXXF thats also good news because now we have information given how desperately they wanted to bring in this paper. I’m with you in that something big is up. At least EXXI trades every day.

  16. 16
    zman Says:

    Red tide but not very. Market content to waffle about until payrolls tomorrow.

    Front and Center Watch.

    TAT still inching higher daily.

    BEXP holding $20. The $22.50s won’t perform until tomorrow on a great jobs number (which I’m not sure what the market would deem as great since better probably means QE is further out and v.v.) if they ever perform.

    WLL – looking at the November calls but not until tomorrow.

    SSN adrift until news. News should be a final $4.1 mm check from CHK initially, then the announcement of progress on the last 2 Bakken wells, then a Bakken acreage buy, progress on the 3D survey in the Niobrara, and finally news from CHK on their latest Niobrara efforts. CHK should play this up next week at their analyst conference.

  17. 17
    BirdsofpreyRcool Says:

    Elijah — always smart to see a convert above intrinsic value. But, yes, something is up at EXXI.

    Heard XOM is marketing a big GoM Shelf package… not tough to put 2 and 2 together there.

  18. 18
    zman Says:

    BOP – There was also a comment the other day that EXXI would have a chance to take some of the working interests MMR just picked up PXP should they so chose.

  19. 19
    zman Says:

    Gas number in 20 minutes

    EXXI picking up, MMR may be following, may be noise.

    Oil dipped then recovered, WLL back to flat which is pretty stout considering we are over $100.

    Look for Bakken player thoughts/metrics as requested by BOP in tomorrow’s post.

  20. 20
    BirdsofpreyRcool Says:

    Shiller is in a good position. He is oily and cash flow positive. That gives one a lot of options. And it is always good to have options. Thx for the reminder on the PXP add’l WI option. Life just gets better and better. 🙂

  21. 21
    zman Says:

    Planning on listening to the CXPO call in at JREC at 11:15 am EST. This guy wrote a piece on it awhile back that is worth a read:


  22. 22
    zman Says:

    JB – when you get a chance could we get a CXPO chart read? Thanks much.

  23. 23
    zman Says:

    Type in the piece referenced in 21, that’s Zavalla county but the timing was right, also see pr from yesterday:


    Note they are in Bee county which is more mainstream than the Zavalla (HK’s Red Hawk field) but the well is still operated by HK. Success there will be noted in the share price.

    The Upper Cook Mountain announced wells is more of the bread and butter for them and they announced a nice well there yesterday.

    And yes, I’m considering adding an opening position as I don’t write those summary pieces for the pure fun of it.

  24. 24
    zman Says:


    WLT – Out of the remaining piece of my only coal name at 81.83, up 18%. I plan to add it back on the next big market swoon.

    CXPO – Added an opening position at an average cost of $2.89. See comments in post as well as a link to my initial view on these guys from January of this year. They speak at an energy conference today and I will have more comments during and after that.

  25. 25
    zman Says:

    85 Bcf, that’s a bit high.

  26. 26
    elijahwc Says:

    BOP is this an all hands on board thing:

    CIGX Star Scientific: Roskamp Institute will soon begin clinical trials of RCP-006 (2.19 +0.09)

    Today the Roskamp Institute said that it is pleased to announce that it will soon begin clinical trials of RCP-006, a compound found in tobacco, for the treatment of Alzheimer’s disease. The compound was developed by Rock Creek Pharmaceuticals, a subsidiary of Star Scientific in Virginia, and made available to Roskamp through its affiliate, SRQ Bio.

  27. 27
    isleworth Says:

    Nice summary on SSN Z – thanks for the refresh!

  28. 28
    BirdsofpreyRcool Says:

    CIGX just popped… here’s why…

    Roskamp Institute to Begin Human Alzheimer’s Clinical Trials
    2010-10-07 14:25:44.556 GMT

    Roskamp Institute to Begin Human Alzheimer’s Clinical Trials With a Natural Compound in Tobacco

    PR Newswire

    SARASOTA, Fla., Oct. 7

    SARASOTA, Fla., Oct. 7 /PRNewswire-USNewswire/ — Today the Roskamp Institute
    said that it is pleased to announce that it will soon begin clinical trials of
    RCP-006, a compound found in tobacco, for the treatment of Alzheimer’s
    disease. The compound was developed by Rock Creek Pharmaceuticals, a
    subsidiary of Star Scientific in Virginia, and made available to Roskamp
    through its affiliate, SRQ Bio, LLC.

    In laboratory tests with cells, the compound, RCP-006, a natural product,
    inhibits inflammation and the production of amyloid, both of which cause
    Alzheimer’s disease.  Previous studies have shown that certain tobacco
    components may be protective against Alzheimer’s disease, but the mechanism
    was unknown and the negative effects of smoking and tobacco use outweigh these
    positive benefits.  RCP-006, one of the many compounds found in tobacco, is
    believed to be responsible for some of the positive medicinal effects of
    smoking and tobacco use.  In addition to the new clinical trials, Roskamp
    scientists are working with researchers at Johns Hopkins School of Medicine
    for other medical applications of RCP-006. RCP-006 is found in the Solanaceae
    plant family that includes tomatoes, peppers and eggplant, but RCP-006 is very
    prevalent in tobacco. Roskamp Institute Director, Dr. Michael Mullan, said,
    “It’s ironic that a compound with the potential medical benefits of RCP-006
    was hidden in tobacco.”

    Alzheimer’s disease is impacting 5.3 million people in the United States and
    women have higher risk of getting this devastating disease than men. The
    economic burden of Alzheimer’s in the U.S. is estimated to be $172 billion

    The Roskamp Institute is a non-profit organization devoted to understanding
    causes and finding cures for neuropsychiatric and neurodegenerative disorders.
    The Institute utilizes a broad range of scientific approaches to understanding
    the causes of and potential therapies for these disorders with an emphasis on
    Alzheimer’s disease. For more information, please call (941) 752-2949.

    SRQ Bio, LLC, a for-profit affiliate of the Roskamp Institute, has a financial
    interest in Star Scientific. In April 2010, Star Scientific issued to SRQ Bio,
    LLC 100,000 shares of common stock in a private placement.  In addition, in
    March 2010, Robert Roskamp, the trustee of the Roskamp Institute, in an
    individual capacity, purchased shares of Star Scientific stock valued at
    $1 million, and was issued a matching warrant for an equal number of shares,
    as part of a private placement transaction.

  29. 29
    BirdsofpreyRcool Says:

    elijah — you’re faster than i am…. Thanks!

  30. 30
    BirdsofpreyRcool Says:

    #28 — Blinding statement of the obvious… but that is H-U-G-E news.

  31. 31
    elijahwc Says:

    CIGX: If I’m not mistaken on daily chart a close above 2.17 confirms a cup & handle breakout with-in an even larger cup and handle formation which will confirm an upside breakout with a close over 2.30. But, TA is not my long suit. JB!

  32. 32
    BirdsofpreyRcool Says:

    elijah — CIGX… you spectating? or in the scrum?? Just wondering….

  33. 33
    zman Says:


    MMR – Took the (15) October $18 calls off the table for just under $0.46, up 31%. I continue to hold the $17’s but with the stock at $16.85 and the big payrolls report due out in the morning and with gas weak on a larger than expected injection these felt a bit too much like playing with fire. Plus 31% in less than 24 hours is always bankable in my view in the options portfolios.

  34. 34
    BirdsofpreyRcool Says:

    z — Great Trade! October is the month for short-term trading… if you get up 31% in a day, Book ’em Danno! Nice.

  35. 35
    zman Says:

    Thanks BOP, glad you are a surface BOP and not the kind on the sea floor. 😉

  36. 36
    Jerome Blank Says:

    RE: #22 CXPO…currently on a P&F sell signal below trendline support, but I do like the ascending triangle bottom formation on the daily…posted a new set charts…a $3 print reverses CXPO back into X’s, technically speaking, a break thru $3, then buy the pullback to support at $2.90, or anticipate the break,buyimh here or more conservatively buying pullbacks to 100 day support at $2.72…


  37. 37
    BirdsofpreyRcool Says:

    well… i HAVE been known to crawl around with the bottom feeders, occassionally. If you want to find diamonds, you have to muck thru the mud sometimes. But thanks. Nicest thing ya ever said to me.

  38. 38
    zman Says:

    re 36 … this is why I vote. The funny thing is JB has a real job and it’s not this. Thank you.

  39. 39
    BirdsofpreyRcool Says:

    GST — have to guess it’s off due to 1) continued uncertainty about PA severance taxes + 2) disppointment about not having an appointement with an EF fraccing crew yet.

  40. 40
    zman Says:

    WLL thinking about waking up… oily, cheap, and wants to put on a show to reflect the new core area and to carry my $100 strikes to new highs.

  41. 41
    zman Says:

    BOP – have you read my CXPO initiation piece. There’s some overlap with the GST stuff (both in middle Bossier and both just about to get into the EFS but no Marcellus and no deep Bossier that I’m aware of at CXPO, although the Upper Cook Mountain is interesting and brings liquids to boot). They look to be turning the corner on volumes after a capex inspired dip.

  42. 42
    ratberto Says:

    JB, voted, thank you!

  43. 43
    BirdsofpreyRcool Says:

    To be perfectly clear… i hate the Marcellus. Someday i will love the Marcellus. But not now. Not today. It’s like oil in California… not worth the effort right now, ‘cuz you’re only gonna get a bloody forehead, banging your head against that wall. jmho.

  44. 44
    zman Says:

    OAS – “we’re going ballistic Maverick”

    CFPS expected to grow 258% from 2010 to 2012. This is the second highest in the group behind KOG which is growing off a much smaller number. More details in tomorrow’s post.

  45. 45
    BirdsofpreyRcool Says:

    And i like the Deep Bossier. Cheap gas, if you can find it.

  46. 46
    zman Says:

    BOP – oil in Cali unless your are OXY or VQ or maybe WRES but I hear ya. So if you hate Marcellus you might be interested in CXPO, worth a listen if you have the time anyway.

  47. 47
    BirdsofpreyRcool Says:

    yes. that is what caught my attention (and precipitated the mini-rant), the fact that CXPO is NOT in the Marcellus. Bully for them! thank you.

  48. 48
    zman Says:

    BOP – caveats –
    * I don’t know management,
    * They’ve missed estimates in the past but appear to be on track to beat this last quarter and this one.
    * Debt is there, have not looked to see if they restructured it but interest costs have been high for their EBITDA as they are gassy.

    So that’s history and why I didn’t buy before and the stock is down substantially since the offer/reorg about 10 months ago.

    Not putting much into as it too trades by appointment and I’ve only got so much room for those.

    Call about to start.

  49. 49
    zman Says:

    CXPO webcast:

  50. 50
    crysball Says:

    USEG. Spoke with Reggie Lawson and also Pamela Sorry @ Thompson Creek Mininng.
    -Moly Project (Mt. Emmons) Should have the necessary drill data to put together mine pre-feasibility study by year end. TC has lots of projects on the plate, but the are layered-in from a Capex & cash-flow basis that the can do them all (assuming economics & metal prices holdup). IMHO TC will continue to exercise the annual option….in a backhanded way it is to TC’s benefit to keep the option alive as it keeps the Asians from looking at it. The mine is an old Copper/Gold/Lead mine……..and in closing the mine they tripped across a very High Grade volcanic Moly curtain splash deposit,which is still being characterized.
    -Roughrider BEXP density plot.TFS & Baaken……..very exciting as BEXP is hinting to USEG they may get even more than 6 wells per 1280 acre drilling unit (3 TFS & 3 Baaken) it all depends on Frac Feather length……..
    -Kentucky project is NOT with USEG……..another company with same name.
    -Keith is still sorting through the options (they looked at too many) for next O& G deal. Will likely stay in or near the area they are already in.
    BOP hit the nail on the head in her analysis of USEG!…….

  51. 51
    RMD Says:

    reviewing notes from the JRCO conference, some observations:
    1. just about every co. is in the EFS and MS;
    2. every co. is “only” drilling oil or liquids;
    3. lots of HS acres and production for sale. Co.s mentioned decreasing rig count into ’11 are CRK, PVA, GMXR, GDP, HK, SWN, SM (and I have not read all the notes);
    4.co. comments:
    GDP 3-4 rigs to 1 in CHK jv, maybe 0 in 2H11.
    HK HS rigs to the EFS, HS rigs (15-35)% at $4-5.00 gas, fund excess capx gap with asset sales in FS and midstream assets in HS and EFS. FCF by end of ’12…what happened to living within cash flow?
    RRC fund capx gap through asset sales, 150mmcfed production on the block so no equity raise.
    SWN decrease midstream HS spend so ’11 cash flow within CF, sell HS, “new ventures” add 200-500,000+ acres.
    COG outspend in ’10, ’11 in line with CF.
    SM sell MS in ’10, HS in ’11.
    Sounds good for the investment bankers.

  52. 52
    Jerome Blank Says:

    CIGX…posted a new daily close up perspective…CIGX has tested the $2.15 area approx 4 times within the context of a much larger longer term consolidation triangle, technically speaking CIGX seems to be suggesting that the breakout direction is much higher prices, $4 is the initial target, right now, thinking pullbacks to the $2 zone for conserviative adds…


    Thanks so much for the votes and comments…I appreciate it

  53. 53
    zman Says:

    CXPO Notes

    Scheduled to complete 3 wells in October in E. Texas, targeting the mid-Bossier (San Augustine and Sabine counties).

    They are the ones that had the big Haynesville well with DVN at 30 MM/d and pulled on it too hard. They now subscribe to the HK mindset, choke it back and get more EUR over time.

    They are modeling wells at 6 to 7 Bcfe EUR, he mentioned EOG’s thinking that this area will have 10 BCFE recoveries.

    ECA, EOG, COG all permitting and drilling in and around their position.

  54. 54
    BirdsofpreyRcool Says:

    JB — thank you. Just voted. And added more at 2.10. I’m more worried about missing the upside, than the downside, at this point.

    That said, stock still seems to be in “sell the news!” mode. Frankly, it should be north of $3 with this Roskamp news. BWDIK.

  55. 55
    choices Says:

    BOP, is CIGX still test marketing and what is product brand name.


  56. 56
    elijahwc Says:

    BOP on CIGX = way deep in the scrum. Still got both ears and always interested in items in between. THX

  57. 57
    BirdsofpreyRcool Says:

    choices — yes. still in the test-marketing phase with inVentiv. 90 days (at least), started in early August.


  58. 58
    BirdsofpreyRcool Says:

    elijah — thanks for your response. I knows yous to be a Smart Guy… so, means a lot to have you on the field with me!

  59. 59
    zman Says:

    CXPO Notes 2

    Their assumptions for E Texas are in line with and maybe a bit more conservative than some I’ve seen for the TX Haynsville, mid Bossier and the James Lime and they left out reserve estimates on a couple of other limes (Knowles and Petit)

    Eagle Ford

    Zavala County – 8K net acres, hbp, no rush to drill, CHK is “extremely” active there.

    Karnes County – 600 net acres, surrounded by EOG, who just permitted a well next to them, CXPO will drill a well here early next year.

    Bee county – 560 net acres, finished 1 well, drilling a second now, both with HK.
    Born well (20% wi) drilled
    Windham well (20% wi), drilling, both will be completed by year end.

  60. 60
    zman Says:

    CXPO Notes 3

    Niobrara – 12,000 net acres, 10 of which are held by production. May drill, may sell it, should know soonish.

  61. 61
    BirdsofpreyRcool Says:

    z — listening to CXPO… but only with half of one ear. Other stuff going on… so THANKS for your notes!!

  62. 62
    zman Says:

    CXPO Notes 4

    South Texas:

    Trends: Yegua, Frio, Vicksburg, Cook Mountain

    Thinking 200 Bcfe net reserves (vs total company reserves of 117 Bcfe)

    Drilled a nice series of liquids rich wells in Liberty County

  63. 63
    elijahwc Says:

    JB just voted re CIGX, thanks

  64. 64
    zman Says:

    CXPO Notes 5

    $50 mm budget for 2010 and will hit that, right in line with cash flow.

    2011 – budget will be up by 20 to 25% from 2010.


    2011 – 50% of PDP hedged at $7.32 / Mcf (nice)
    a little less on oil

    Knew I knew of someone in management here, Tom Atkins, former NFX and EOG exploration guy, smart.

  65. 65
    zman Says:

    WLL back over $101, liking that it’s rising on its own, without the market and without oil.

  66. 66
    elduque Says:

    I am thinking I should put together a basket of all your small producers. They all look fine and just a matter of Nat Gas, being higher. GST seems like it could be an easy double with a marginally better environment. In reading your notes on CXPO, the same looks to be true.

    I wasn’t paying attention a year ago, but correct me if I am wrong, but we weren’t seeing the cutbacks on drilling then, were we?

  67. 67
    choices Says:

    Thanks, BOP-got a little worried when I saw a commercial on TV last eve for CIGArrest.

    FWIW, found this which is a couple of months old but may be of interest:


  68. 68
    zman Says:

    re 66. We were seeing some cutbacks, not as much as we are seeing now. Then we had a rally in rigs after the drop. And then the correlation between gas rigs (what’s a gas directed rig these days anyway, getting harder to tell) and gas supply got increasingly wonky.

  69. 69
    BirdsofpreyRcool Says:

    choices — thanks! Saw that, but good for people to know. By the way, Andy did his own test… haven’t heard lately, but the early results sounded very positive.

    Also, Apologies to All about this not being an energy-related topic/stock. I pushed this boulder off the cliff a while back on a quiet Friday on this board… just doing my duty by keeping people informed.

  70. 70
    zman Says:

    re 69. No apologies necessary, a little variety is OK, and it’ll teach me to never go on vacation again 😉

  71. 71
    BirdsofpreyRcool Says:

    #70 — ha! Mission Accomplished then. All z, all the time. YAY!!!!!!!!!!!

  72. 72
    zman Says:

    MMR waking up now, back over $17. Still tomorrow could be a hand grenade of a number from the feds. My $17s are waking up again.

  73. 73
    zman Says:

    I think I just got sandbagged.

  74. 74
    ram Says:

    What popped BEXP?

  75. 75
    zman Says:

    BEXP = what the heck?

  76. 76
    john11 Says:

    BEXP responding to some rumors on DealReporter about M&A activity, MRO and COP mentioned.

  77. 77
    zman Says:

    John – thanks, what did they say?

  78. 78
    john11 Says:

    Can’t copy but quote Bud as saying they have heard informal interest from suitors and expects interst to increase next year driven by company’s success in the Bakken.

  79. 79
    john11 Says:

    Two industry bankers have said the company is an attractive acquisition candidate.

    Should mention that I personally am not a big fan of DealReporter.

  80. 80
    zman Says:

    Nice, perfect, time to play the $22.50s with house money. Switching to tick chart view. Also known as how you get nothing done while sweating a trade.

  81. 81
    zman Says:


    BEXP – Sold 33 of the 100 $22.50s taken two days ago for $0.15, up 156%, with the stock up on potential takeover rumors at $20.60. Done on the mid and quite easily. Time to play with house money. I continue to own the $20 strikes and the common in the ZLT.

  82. 82
    zman Says:

    Just saw 79. The fact that Bud didn’t just quash it and not only that but that he said he sees increasing interest is what’ll lead to some craziness in the stock. Most guys would just say “no comment”.

  83. 83
    BirdsofpreyRcool Says:

    Maybe Bud is planning on spending Christmas in the DR with the Fam… and needs to sell a little stock to fund it. ha!

  84. 84
    choices Says:

    Unintended consequences for wind power:


  85. 85
    blackgold39 Says:

    Z – awesome call on the BEXP 20’s and 22.5’s this month. I picked them up post pre- earnings bump and was also holding the common, just turned them all for ~100% in 2 days.

  86. 86
    zman Says:

    Thanks much BG. Lot o luck in that trade I have to acknowledge.

    I’m assuming they will have to put out a pr on the activity in awhile, maybe not but if we do at least it shouldn’t contain the usual “we have no idea why our stock is up” that’s always a spike killer.

  87. 87
    zman Says:

    Re BOP – LOL, could be. If I was going to take someone out I think I’d go with WLL.
    1) it’s cheaper
    2) it has more established production
    3) it’s new core area is interesting and big and has more holes in it to derisk it
    4) you get two waterfloods on the cheap which have shown repeated signs of increased recovery factors

  88. 88
    zman Says:

    BEXP volume 160% of 3 month average. Stock stopped just short of the May high of $21.15. Getting dragged down by the S&P sell off, at least partially, OK back to work.

  89. 89
    PackMan Says:

    Good afternoon all.

    One can always find the key info right here. Was wondering what caused the pop on BEXP.

    Also wondering about EOG strength today if anyone has any thoughts.

    Finally, does Nicky have an update on the comments from earlier given the pre-market strength and all day weakness ?

  90. 90
    zman Says:

    Pack –

    RE EOG – my sense is it is a little follow through on their presentation the other day and the omission of a production guidance cut. They made some comments about lumpiness quarter to quarter which is nothing new, they highlighted the 2 recent big Eagle Ford wells (again not new but they were 2,000 boepd type wells which is strong for the play) and they kept guidance unchanged for 2010,11,12.

    Re Nicky – I will send her an email

  91. 91
    zman Says:

    SSN exhibiting best volume in two weeks as the stock attempts to trade sideways.

  92. 92
    choices Says:



  93. 93
    zman Says:

    re 92. Great clock/map!

    Interesting to see Canada has more debt per person than U.S.
    Good for Brazil
    How does Greece get away with negative debt growth?
    Saudi should thank the U.S. for that low level.

  94. 94
    john11 Says:

    Northern Oil & Gas initiated with a Outperform at Northland Securities; tgt $25

  95. 95
    zman Says:

    re 94, thanks, had not seen. Don’t know Northland. Was that today?

  96. 96
    BirdsofpreyRcool Says:

    #92 — and yet… there are those in Congress (and elsewhere… you know who you are, Georgie S.), who think we should BORROW MORE to spend on STIMULOUS. “More Stimulous!,” they say.

    To thems who says thats… me says “we don’t needs more stimulous, we needs MORE COWBELL!”

    (makes about as much sense…)

  97. 97
    ram Says:

    Thanks Choices. China basically has no debt. I wonder if he U.S. will ever get a “thank you very much” from the Chinese.

  98. 98
    zman Says:

    BOP – please check your email.

  99. 99
    Nicky Says:

    Afternoon all. Hi Packman. I thought it looked hopeful for a cycle high this morning. At the moment the support at 1150/51 is proving strong and I wouldn’t be surprised to see a fairly flat close ahead of tomorrow. I can only see 3 waves off this mornings high so at the moment I have no confirmation the top is in. For the larger 45 day cycle to confirm a top we would have to take out 1131 on the downside. I do think when the correction comes its likely to be fast and sharp, maybe a week or two…..

  100. 100
    BirdsofpreyRcool Says:

    Yikes! Did i say something wrong… again?

  101. 101
    zman Says:

    LOL, No, I needed a favor.

  102. 102
    zman Says:

    Bakken call options without expiration in case BEXP does get bought? Best thought is KOG common.

  103. 103
    VTZ Says:

    Re 97 – Canada doesn’t however have over 100 trillion of unfunded health care liabilities.

  104. 104
    zman Says:

    I skipped the GMXR presentation at JREC, forgot actually. Down another 7%. Will listen to the replay.

  105. 105
    VTZ Says:

    I could go on a big rant about household debt in Canada though. Sad state of affairs and that without a housing collapse and low rates.

  106. 106
    zman Says:

    103 – I knew you were lurking. Ouch, good point.

  107. 107
    zman Says:

    Looking at the two balance sheets and the resource pool up there I have to say the U.S. really should look into acquiring you guys. Totally accretive deal for us. Now, we’d have to discount some of the more inhospitable parts of your acreage and there might be a language barrier in places but at least you guys wouldn’t have to worry about tariffs on trees and oil sands production anymore and you wouldn’t have any more hassle at the border when you want to come shop.

  108. 108
    bill Says:

    oil down 2 bucks, what happened

  109. 109
    VTZ Says:

    Hahaha, I’ve said that for years.

    Some days I feel supportive of that… Some days I feel very patriotic…
    and some days I hope for the sovereign nation of Alberta

  110. 110
    zman Says:

    Bill – I think my comment in the post of the last few days and today did. Just up too much, too fast for no real reason. Profit taking ensued. If the payrolls number stinks tomorrow and the DJIA falls 200 to 300 I bet oil gets smoked for another $3 to $4. Unless of course the number is really bad and then all signs point to QE2 and then who knows.

  111. 111
    BirdsofpreyRcool Says:

    Thanks for #102. Fair warning… KOG falls below $3.50, I’m sticking a paw outta the weeds and grabbing me some o’ dat. heh heh heh

  112. 112
    BirdsofpreyRcool Says:

    Oil is down… and yet… EXXI and MMR are strangely bouyant.

    Things that make you go hmmmmmmmmmmmmmmmm….

  113. 113
    zman Says:

    re 109. Sounds like some Texans I know.

  114. 114
    zman Says:

    re 112. Agreed. Strange mix of ups, those 2 plus BEXP, WLL, OAS, KOG most else are red.

  115. 115
    PackMan Says:

    Z – 90

    Nicky – 99

    Thank you & thank you.

  116. 116
    zman Says:

    Pack – anytime. Do you know where Goldman is on payrolls currently and if they have shifted their number yet? They seem to shift it the day before the number comes out, often late. Thanks.

  117. 117
    zman Says:

    CNBC showing a bunch of naked guys now. How do I get Bloom TV on my PC again?

  118. 118
    bill Says:

    1 day doesnt make a market but bulker rates are moving off the bottom

    the bdi has been up 4 days in a row and should also be uo tomorrow

    cape spot rates are about 40 k a day


    i bot some nov 13 calls on dsx for 50 cents, they could double with a 1 dollar move in the stock

    balt would benefit too with improving spot rates

  119. 119
    bill Says:

    good move with exxi, backed the wrong horse with pxp as usual, lol

  120. 120
    zman Says:

    Bill – thanks, keep reminding us. Watching those two.

  121. 121
    PackMan Says:

    BEXP Form 4 filed

  122. 122
    PackMan Says:

    Z – 116 – no idea

  123. 123
    jiveyjr Says:

    in no way trying to compete with JB or Nicky…but I’ve been watching DSX and EGLE…like the way those shipping stocks have been basing….DSX is up on big vol. but has fallen back a good bit from its high…EGLE is sitting at its breakout point on not very significant vol.

  124. 124
    bill Says:

    egle has a lot of debt and dsx is almost debt free so if we see a big pop egle is more levered to the upside

    dsx less risk

  125. 125
    choices Says:

    CPAN-2 has live panel discussion on fracing issues:

    still trying to sort things out-Lee Fuller of Independent Petroleum Association spoke for industry-hatchet man now speaking, examples of water supply pollution.

  126. 126
    choices Says:

    Marcellus Shale horror stories from hatchet man.

  127. 127
    choices Says:


  128. 128
    zman Says:

    Thanks choices, will have a listen.

    Market going quietly into the afternoon.

  129. 129
    jiveyjr Says:

    thx Bill re: 124

  130. 130
    ratberto Says:

    Dallas Fed’s Richard Fisher: Not so fast with QE2.
    Today’s speech in MN:

    “…my soundings among those who actually do the work of creating sustainable jobs and making productive capital investments―private businesses big and small―indicate that few are willing to commit to expanding U.S. payrolls or to undertaking significant commitments to expand capital expenditures in the U.S. other than in areas that enhance productivity of the current workforce.”

    “The reality of fiscal and regulatory policy inhibiting the transmission mechanism of monetary policy is most definitely present and is vexing to monetary policy makers. It is indisputably a significant factor holding back the economic recovery.”

    “Far too many of the large corporations I survey that are committing to fixed investment report that the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad where taxes are lower and governments are more eager to please. This would not be of concern if foreign direct investment in the U.S. were offsetting this impulse. This year, however, net direct investment in the U.S. has been running at a pace that would exceed minus $200 billion, meaning outflows of foreign direct investment are exceeding inflows by a healthy margin. ”

    “There is a great deal of legitimate debate still to take place within the FOMC on the subject of quantitative easing and the pros and cons and costs and benefits of further monetary accommodation. Whatever we might do, if anything, must be consistent with long-term price stability and not add to the nightmare of confusing signals already being sent to job creators.”

  131. 131
    zman Says:

    Thanks Rat

  132. 132
    jiveyjr Says:

    on a slow day…I thought I’d post this to entertain BOP and others…..

  133. 133
    BirdsofpreyRcool Says:

    jiveyjr — that is HeadTrader’s Theme Song… how’d you know?!!!!

  134. 134
    jiveyjr Says:

    we’ll he’d fit in down here in Texas amongst us rednecks….tell him to c’moan down!

  135. 135
    bill Says:

    here is an interesting press release from mee
    massey energy

    JULIAN, W.Va., Oct 07, 2010 /PRNewswire via COMTEX/ —

    Today, Massey Energy Company (NYSE: MEE) announced that officials from the U.S. Mine Safety and Health Administration (MSHA) have prevented one of the Company’s lead investigators, Dr. Christopher Schemel, from participating in further investigative efforts at UBB. MSHA has indefinitely denied Dr. Schemel underground access to the mine on the grounds that he has not received experienced coal miner training. By contrast, MSHA personnel and others without such training have not been excluded

  136. 136
    BirdsofpreyRcool Says:

    jiveyjr — will do… he will be honored, i’m sure. (And you’d like him… he’s one FUNNY dude!)

  137. 137
    jiveyjr Says:

    EGLE now breakout out a bit on better volume…. FWIW

  138. 138
    andy Says:

    bop – speaking of head trader – haven’t heard any comments re mkt out of him lately

  139. 139
    ram Says:

    Does it appear to be the M&A rumor that is still keeping BEXP at this level?

  140. 140
    zman Says:

    MMR really catching fire again now.

    Ram – for the rally today I would guess yes. But the level is also explained by news from 2 months back that was strong and yet the stock ignored it and the news from 2 days ago out of the RR TFS well and this week’s presentation at JREC.

  141. 141
    ram Says:

    9.3M shares seems like alot without a BEXP response.

  142. 142
    zman Says:

    Look at the minute chart on MMR if you want to see volume. Something is cooking I’d say.

  143. 143
    jat Says:

    Hard to buy M&A when the CFO sells 20%+ of his holdings

  144. 144
    john11 Says:

    That BEXP cfo sale was a pre-arranged 105-b plan…fwiw

  145. 145
    zman Says:

    Jat saw that, thought same, maybe he didn’t care about the extra $100K a $25 offer would give him, still plenty of exposure. But I do hear ya on that.

  146. 146
    john11 Says:

    sorry that is..10b5-1 trading plan

  147. 147
    zman Says:

    re 144 … ahhh-soooo! Interesting. Of course, only about 1% of these rumors pan out.

  148. 148
    john11 Says:

    yes agree with the 1% estimate..ggg

  149. 149
    zman Says:

    MMR – volume mounting into the close and stock approaching $18. Gotta be a rumor their too, either for the company or for them getting some cash to farm out some of their new interests to EXXI or some other party. Wonder if Jim Bob will turn a profit on the short term hold of those WI%s, lol.

  150. 150
    BirdsofpreyRcool Says:

    The MMR / EXXI holder’s theme song (redux)

  151. 151
    BirdsofpreyRcool Says:

    That said… whatever EXXI is planning is gonna take both stock and bond issuance. But, if Shiller’s buying, I ain’t too worried about over-paying. May hit the stock price back a bit (temporarily) tho. On the other hand, EXXI announced a 5 for 1 reverse split last year… and the stock went UP on the split. Practically UNheard of!

  152. 152
    zman Says:

    Well that was fun. Beerthirty.

  153. 153
    jat Says:

    I sold my MMR this morning and am now rather grumpy.

  154. 154
    BirdsofpreyRcool Says:

    jat — no one ever went broke taking profits. Pat yourself on the back for buying MMR in the first place. Good move, guy!

  155. 155
    jat Says:

    oh, that part was easy with posters like you and z

  156. 156
    cargocult Says:

    Was it Joe Kennedy who said the reason he made money was “I sold too soon”.

  157. 157
    BirdsofpreyRcool Says:

    AA just beat big on earnings….

  158. 158
    BirdsofpreyRcool Says:

    IBM closed at a new high… finally beating the high it set back in…. wait for it…..


  159. 159
    bill Says:

    MMR going up after hours, exxi volume soaring

    something is definitely up………

    must be good cause pxp closed up 2 cents, lol

  160. 160
    bill Says:

    mmr rumors, “not a tight hole”


  161. 161
    bill Says:

    soros ups stake in pxp-flores be damned


  162. 162
    elijahwc Says:

    Bill you can take comfort. Soros actually manages little if any of the funds in the shop. Instead he seeds “promising managers” with capital until they buy PXP become not so promising and get fired.

  163. 163
    zman Says:

    SSN on the tape, details in the morning post

  164. 164
    zman Says:

    Scope expanded on me on the Bakken stuff, look for that in the Monday post.

  165. 165
    West Says:

    http://ir.conchoresources.com/phoenix.zhtml?c=211775&p=irol-newsArticle&ID=1480450&highlight=……   CXO closed on their previously announced acquistion of privately held Marbob Energy. Apache exercised BP pref rights on about a 1/3rd of the New Mexico properties that were jointly being developed. CXO closed the deal for approximately $ 400 million les than anticipated. Although CXO is probably not the highest offer for SD's non-essential Permian Basin properties, on total value of the two different areas, I still think that they are front runners to do this deal……..The Wolfberry has established production plus some very promising acreage in clusters that are very desirable. This should be valued at or above $200 million if recent prices for other properties in the area are applied. Since there is established production and most of the northern acreage will probably be in PUD designation in the next year, this is also attractive to cos like LINE and LGCY. Private company Henry Resources also has large position in northern Upton and southern Midland Counties. The hottest part of the Wolfberry play continues to be Martin Co. where many wells are IPing around 300 bopd and some associated gas. That is a extremely profitable vertical well at less than 10k'……………….SD's acreage in the Delaware Basin of Texas has huge potentional , the area is still in its early stages of development for Bone Springs and deeper formations. Once again we have an area of interbedded sandstones, carbonates and shales . New technologies,  horizontal drilling, high rate fraccing and seismic imaging while fraccing is making the economics work on very tight formations. SD's large concentrated acreage position greatly increases inherent value of this block…Although it would be out of the norm for APC, APA or XEC to make a high bid offer for this property , the strange twist would be if CHK emerged with a deal between Aubrey and Tom…………CXO is very aggressive and the money people have done extremely well with this management team in the past, so the money is there.They also can monetize their Bakken assets anytime they desire…Back in September I said that I thought they would get a deal done on these properties within 60 days , so maybe they announce something before the end of the month or their 3rd qtr earnings call………..These seems like an excellent fit to me and time will tell.

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