15
Oct

T.G.I.F. – I Get By With A Little Help From My Ben

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Market Sentiment Watch: The return of malaise. Economic data pointing to better than expected results and Ben Bernanke is speaking at the Boston Fed this morning and his comments such as "short term rates are too high" and "inflation will remain below target for some time" are pleasing equity futures. MMR kicks off energy earnings season next Monday but the heart of the season for the E&Ps won't hit until the end of the month. I'll have a Bakken update piece out on Monday. 

Ecodata Watch:

  • CPI was 0.1% vs 0.2% expected; core came in at 0.0% (as Ben said, below target despite some comments to the contrary on PPI yesterday)
  • Empire State was 15.7 vs 6.5 expected  (this one jumps about a lot but that's a strong number)
  • Retail sales was 0.6% (0.4% core) vs 0.5% expected (also stout)
  • We get consumer sentiment at 10 am EST, forecast is 69.8 with a last reading of 68.2.

In today's post:

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

Holdings Watch: 

ZCAT (Zman Catalyst portfolio):

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

ZIM (Zman Inefficient Markets portfolio)

  • $7,600
  • 46% Cash
  • Yesterday’s Trades:
    • MMR – Added (5) November $18 calls for $2.20 with the stock at $18.40. Earnings Monday should provide an interesting operations update.
    • WILDZ - MMR – Added (10) October $19 MMR calls for $0.56 with the stock at $19.18, up 2.5%. Obviously high, high risk, but small money trade.
    • WILDZ - MMR – Added (10) more October $19 Calls for $0.33 with the stock at 18.83. 

Commodity Watch

Crude oil retreated $0.32 to close at $82.82.69 yesterday after the EIA reported a fairly bullish looking set of numbers but the equity market took a breather. This morning crude is trading flat. 

Natural gas closed off 4 cents at $3.66 after EIA reported an in line storage number .... a storage number that was still a record for this week of the year due to mild weather and over production. This morning gas is trading flat. 

  • Tropics Watch: Paula goes away; nothing on the horizon at the moment. 

 

Oil Inventory Review 

ZComment: Utilization fell to 81.9% which should be about the low this season and which equates to daily consumption by refineries of just under 14 mm bopd (also the low). The numbers in the report were on the whole pretty strong and should improve in coming wees as demand for distillates picks up and refining stays flattish, allowing inventories to erode. 

Natural Gas Storage Review


ZComment: Mild weather is bad. Target for end of season peak storage is moving towards the 3,750 to 3,800 Bcf range. This will keep prices weaker longer in the winter. 


Stuff  We Care About Today

SSN Operations Update: Final Goshen County, Wyoming Acreage Closing

 

  • SSN received an additional $3.523 mm from CHK yesterday and another $0.3 mm is onn the way to wrap up the deal. 
  • SSN says in the press release total consideration is $73.673 vs a prior estimate of $74 mm but if you go back to when this all started the range was $61 to $79 mm. Not bad for little SSN vs goliath CHK. 
  • That should put net cash on the balance sheet at $66.7 mm ($77.8 mm less debt of $11.1mm ) or $0.80 per share or 65% of last night's closing price of $1.23.
  • Samson also points out CHK's analyst day comment about wells in the Niobrara having average recoverable reserves of 500,000 boe per well. In their own NAV model, SSN has been using 413,000 BOE, which got them to a long range target of about $10 per share. If it all works this would probably be a fair number for their remaining 17,000 acres. CHK also made the comment that the play was fairly homogeneous. I think this comment may be a bit early, based on the lack of real understanding regard broad swaths of the known limits of the play. I plan to stick to my $2.10 acreage and other asset and cash derived back of the envelope NAV until I see the results of the first 2 CHK wells on the acreage SSN sold. After that I'll likely call part of the acreage de-risked and adjust my NAV upward as I think the results warrant.
  • I don't think we will have long to wait to find out. CHK has spud two wells on the acreage that SSN sold and we should get results on those by year end.  
  • I asked management about why CHK simply didn't take all of SSN's acreage with the presupposition that the reason was that SSN would not sell all their acreage. That's correct, they would not.
  • I also asked if there was a geological reason why CHK would not have wanted the acreage that SSN retained. SSN says they are at least equal and that an argument can be made that SSN acreage is superior. I plan to get into that argument with Terry Barr, the president of SSN soon but am thinking it's a question of play thickness to the north and didn't want to wear out my welcome. 
  • But I did ask one more question, because I'm apt to ask a lot of questions when I get someone's attention. I inquired about the possibility of HAL being a working interest partner in the retained Niobrara acreage and got back that they could not comment to me on that before a press release. Take that for what you will.

 

Other Stuff:

 

Odds & Ends

Analyst Watch:

  • RIG - RBC upped target from $66 to $75, rating Outperform

78 Responses to “T.G.I.F. – I Get By With A Little Help From My Ben”

  1. 1
    zman Says:

    EXXI taking another bit of preferred off the table.

  2. 2
    bill Says:

    chk
     
    http://www.pennenergy.com/index/petroleum/display/6421909998/articles/oil-gas-financial-journal/unconventional/chesapeake-energy.html

  3. 3
    BirdsofpreyRcool Says:

    EXXI — having to pay up to retire those perpet preferreds… ugh.  Keep the lesson in mind, Mr. Schiller…. your bankers sold you a Bill of Goods with that issuance… THEY got the GOODS and YOU got the BILL.  Stupidest piece of paper I've seen issued in a looooong time.
     
    EXXI wouldn't do this, unless some large Balance Sheet action was in the works.  JMHO.  But we shall see….

  4. 4
    BirdsofpreyRcool Says:

    (Stupid for the company… GREAT for investors.  Way to go, Eli!)

  5. 5
    bill Says:

    Thanks for the ssn update. Excellent!!

  6. 6
    bill Says:

    BDI up 9 out of 10 days driven by improvement on capes
    Based on oct spot and current ffas BALT avg q4 rate is 22.5 which would yield a divy of .31 cents if no new shares issued and 21 c if new shares are issued.
    I think they hold at .16 for q3

  7. 7
    bill Says:

    meant to post this link, note cape strength
    http://www.tradewinds.no/drycargo/article568783.ece

  8. 8
    BirdsofpreyRcool Says:

    EGY up in premarket… will be fun to see what they are up to… can't keep a lid on news forever.

  9. 9
    zman Says:

    Thanks guys, am around but handling a back office snafu this am. 

  10. 10
    cargocult Says:

    Thanks for the SSN update. How come the street has not recognized the value in this company? I have a bunch of it, but is this time to add?

  11. 11
    tomdavis12 Says:

    Z: CSFB upgraded PTEN. TP 17 to 23. Mostly a PP call. They are a little behind the curve. 

  12. 12
    cargocult Says:

    Bill- I continue to appreciate your shipping updates and insight. I'm in DSX, NM, and FRO. Those rich dividends from ages past make up a good part of my basis so I'm not hurting as much as I might be, but I'm still debating my past decision to reinvest dividends instead of taking the cash.
    My strategy, if one could call it that, is to gradually transition from growth opportunities to income as opportunity knocks. In that vein I have been building positions in business development companies TICC, ARCC, and a new position in RSO. Since it's Friday I add "show me the money"!

  13. 13
    bill Says:

    I think dsx increases its divy at some point. I like NM as well.
    Thanks for the tips

  14. 14
    zman Says:

    Cargo – I think the reason is the rally it has had and the fact that they are Australian and basically trading at a buck.  We're in a lull between news items so some investors, having just scored a double are hitting the exits. I'm being a lot more patient than I originally set out to be (this was a Bakken story in the beginning) since the situation has evolved. I'm considering adding at the moment but I own a good chunk now. My sense is that news from Northstockyard (Bakken play) will be helpful late this year, that news out of CHK and others in the Niobrara will also be constructive (assuming the results are what people think they will be. As we get into 1Q, when they are about to spud their own wells I suspect we will see the stock start to wake up. When looking around at other E&Ps, I don't find many trading with such as cash on the balance sheet % of trading value. 

  15. 15
    bill Says:

    cargo> Tanker update
     
    http://www.hellenicshippingnews.com/index.php?option=com_content&task=view&id=125573&Itemid=93

  16. 16
    zman Says:

    Consumer sentiment was below expectations. 

  17. 17
    elijahwc Says:

    Silly question from the you need to spoonfeed me crowd. 
     
    Yesterday did we ever find consensus on Aubrey's new mystery  shale and on whom the well landed smaller player might be?

  18. 18
    zman Says:

    Woodbine (according to Reef who would know) / GST

  19. 19
    mimster90 Says:

    2 for the price of one..Oil and Shipping
    Russian gas tanker dumps Suez Canal for alternative route
    In what is considered to be a threat for one of Egypt's most important national income sources, Russian gas tanker Baltica has made it through Murmansk, Russia, heading to Shanghai, China through the Arctic Ocean; experimenting with the use of this course as a substitute for the southern route, which goes through the Suez Canal.

    If Baltica makes it safely to its final destination, 5,000 nautical miles, US$1 million and 40 days will have been saved, a financially lucrative shortcut that could be used by all Russian oil tankers heading from Murmansk to East Asian markets, according to Russian experts.

    The new route has been created thanks to global warming, which has caused Antarctic ice to melt.

  20. 20
    cargocult Says:

    FRO looks like dead money for some time to come. I own SFL who has an ownership interest in FRO and SFL has been bucking the downtrend. Do you know if they also own part of SDRL?

  21. 21
    zman Says:

    They're slamming the door on longs today, pinning to the downside targets. Ugly. 

  22. 22
    jat Says:

    I don't known about SFL but FRO and SDRL are linked at the hip through the chairman Fridricksen. He owns them both.

  23. 23
    Popeye Says:

    Thanks also for the SSN update Z. I'm on my 3rd round trip here now on house money.

  24. 24
    zman Says:

    All of the minute charts look the same today, crash and burn, then bounce with the S&P. Reference SPX, MMR, CHK. Silly options expiry market. Ripping the W from my keyboard until further notice. 

  25. 25
    zman Says:

    Popeye – glad it's working for ya, hopefully they spend the money wisely. I know they are hunting in the Bakken for more land. They're also spending $2 mm on the Goshen 3D. That 3D will cover more acres than they own so I'd bet they fill in some holes in their position based upon the seismic interpretation around year end. 

  26. 26
    zman Says:

    EOG up $1 to $100 …. pinning put holders. Everything else looks like kill the caller action. BEXP especially. 

  27. 27
    BirdsofpreyRcool Says:

    It is tough for mrkts to go up, with banks under attack.  You may hate banks… you may hate bankers… you may loath Wall Street… but our economy can't live without them (it's like hating your Utility Company but still needing to heat your house).  So… until Mr. Market is assured that we are not facing another Bank Meltdown (which we aren't)…. he will continue to wear his Grumpy Face. 
     
    TED Spread not indicating that anything is wrong in the banking market.  He is clocking in at a steady +14.9bps.  Tells me, this too shall pass.  Perhaps BAC is a "buy" here….

  28. 28
    mimster90 Says:

    zman, the Marcellus shale seems to be the forgotten stepchild, are there any current value plays there? or is everything currently all about being oily?

  29. 29
    zman Says:

    Hear ya BOP, good day for a bike ride, run, swim etc. 

    Mimster – like BOP, I am no big fan of the Marcellus. I don't know about value plays there as most things have high valuations. Perenially good stock performers include RRC, UPL. CHK has the biggest slug of acreage there and SWN has a position which, along with GST, is my exposure to the play. Nothing wrong aside from ugly topography and hard to deal with states in some cases, gas actually gets a premium to nymex but it is gas and I like a more balanced play. If you like names that may be fully valued but don't miss earnings and production projections take a look at that RRC. 30 straight up production quarters. 

  30. 30
    mimster90 Says:

    thanks zman, I am just turning over rocks to see what squiggles out.

  31. 31
    elijahwc Says:

    GST – thanks Z & West
    on #28 & #29, MHR has a big slice of MS that literaly has a zero cost basis acquired through the Triad BK last year. 

  32. 32
    crysball Says:

    MMR,………….Z & BOP……..there  was an earlier discusion about antiipating a Friday run into earnings  on Monday………..do you still consider  that a possibiltiy late in this  afternoon (after the CBOE  option traders   flush out the weak hands with their  'pinning action'  …….specifically Oct. 19 Calls….or  are  the a 'BRIDGE  TOO FAR' to reach  in just  the last  couple hours of trading?

  33. 33
    jat Says:

    Re 29, atls starting to get a lot of marcellus love.

  34. 34
    zman Says:

    Crys – as long as the S&P doesn't simply tank I still do. Not pinning any extra dollars on it though as these days are highly unpredictable. 

    re 33. There's a big long list incl COG, PVA, many of the big caps. 

  35. 35
    mimster90 Says:

    I have ATLS already via ATN, I miss the divvy so much.:-(

  36. 36
    BirdsofpreyRcool Says:

    crys — i will be shocked if MMR doesn't have some positive operational updates from DJ#2 and BBE to talk about on Monday.  The fly in the ointment is that MMR's current production is still declining… not new news, but it always seems to surprise some people when it hits.  Those people are driving by looking in the rear view mirror, so they can wreak some havic with their Stupid Traffic Moves.  I bought some MMR y'day at 18.40, so tells you what I think. 

  37. 37
    BirdsofpreyRcool Says:

    "havoc"…. really, I can spell (on most days…)

  38. 38
    zman Says:

    S&P greening up, group as well… odd but welcome. Watching for an exit on the lower strike BEXP calls. 

  39. 39
    Dman Says:

    BOP – whaddaya mean the economy can't work without banksters. Haven't you heard of barter?  You lend me some cabbage seeds if I give you some shotgun shells up front. What's not to like?  Actually, since Wall St likes complexity, they should be really into this. Arbitraging carrots and beans against hammers and plumbing fixtures should keep the quants busy for a while.

  40. 40
    zman Says:

    Well, at least barter does have the advantage of being rather hard to tax. 

  41. 41
    zman Says:

    SSN = 141K traded = news ignored.

  42. 42
    zman Says:

    Baylor – please check your email

  43. 43
    Dman Says:

    Z – do you still think EOG is pinned? Intraday chart looks kinda purposeful.

  44. 44
    zman Says:

    West – do you see any production data for the Pederson 10-3H well?

    Dman – probably, but if the S&P wakes up it will be one to rally on the strong get stronger theory. 

  45. 45
    BirdsofpreyRcool Says:

    #39…. yeah.  And we used to live without electricity, central air conditioning, stovetops, and Utility Companies, too.  Go figure.

  46. 46
    zman Says:

    MMR getting ready to wake up it seems, trying for green.

  47. 47
    crysball Says:

    SSN, GST, BSIC, CXPO…….. patiently buy the dips  and  wait  for  the  inevitable news………must say  SSN  has  consistently   'DONE  WHAT  THEY SAID THEY WOULD DO………..AND  BY AND LARGE WHEN THEY SAID  THEY WOULD  DO IT……………very shrewd  lease  acquisition and JV  work.
    A JV  with HAL  on the remaining  Niobrara  acreage   would  be like 'FROSTING  ON THE CAKE' as  it assures  SSN 1ST  PRIORITY  in completion  scheduling  instead  of  having to wait in the back of the bus.
    If the  early  CHK /SSN  Niobrara  well  come  in (as  Z  pointed out 2 are already speudded an we  willl  know b4 year end the  we are off   to the races.
    Have not heard any more about the  drilling  unit   SSN was to form?  did this go by the wayside  in the CHK/SSN  JV????????? ………..would think not as  there are still 17,000  acres  of  Niobrara inventory  left to prove up.

  48. 48
    cargocult Says:

    bop-some of us still do live without that stuff. In fact billions of people.

  49. 49
    zman Says:

    Crys – have not heard anything by way of confirmation. Have some more ?s in with them, will let ya know if I hear anything along those lines. 

  50. 50
    Dman Says:

    BOP – just hang on there while I figure how many carrots equals a central aircon system.  A Utility company? I don't have enough vegetables for that.

  51. 51
    BirdsofpreyRcool Says:

    cargo — wow.  And i thought i was deprived by not having a SMART PHONE.  πŸ˜‰

  52. 52
    Dman Says:

    Z – I guess it just bothers me .. I didn't see anyone give EOG permission to rally. Don't they have to apply for a permit?

  53. 53
    BirdsofpreyRcool Says:

    but… at least for the most parts of the U-S-of-A…
     
    "How you going to keep them down on the farm
    After they've seen Paree" ??
     
    Genie's long out of that bottle. 
     
    Maybe I should go buy a GPS… can't believe i still use MAPS.  ha!
     

  54. 54
    BirdsofpreyRcool Says:

    Getting my wish on EXXI… sorry about that.  Didn't want my trading shares called away at $25.  On the other hand, day's still young!

  55. 55
    zman Says:

    GPS is so 2005ish. Iphone it. 

  56. 56
    BirdsofpreyRcool Says:

    #55 — ZING!!
     
    good one.

  57. 57
    BirdsofpreyRcool Says:

    Guess i'll go grab my flint, wood chips, strike up a fire and have lunch now…

  58. 58
    cargocult Says:

    I'll fess up- I have electricity and running water. But don't make me get a tv.

  59. 59
    crysball Says:

    Iphone  so  2009iah…….Ipad it.
    p.s love  my Ipad

  60. 60
    Dman Says:

    Z – 3Q still a few weeks away for EOG.  Do you see any other catalyst? I'm wondering if there is a move to get in ahead of 3Q.

  61. 61
    zman Says:

    Oil and Natural Gas: Jobs and U.S. Energy Policy

    American Petroleum Institute (API) President Jack Gerard will give a Clinton School lecture about his industry’s role in the American economy, particularly its ability to create jobs. The oil and natural gas industry is responsible for 9.2 million American jobs, according to API, the national trade association representing the oil and natural gas industry. 

    When:    Friday, October 22, 2010
                       12:00 p.m. – 1:00 p.m. – Lunch & Lecture
                       *Bring your own lunch. Drinks provided.

    I will attend

  62. 62
    zman Says:

    Dman – I don't and I rather doubt it would run up into those earnings given the last couple of quarters and the fear associated with them.  That being said they probably run up and then sell off. Hard to say, I'm not playing other than as a small common share owner in the ZLT. I'm going to wait out the quarter before adding or not to the ZLT. I don't see myself punting the first set of shares I took a few weeks back anytime soon though. 

  63. 63
    zman Says:

    crsyball – it's on the Zman stocking stuffer list. I hear the Nasdaq app is excellent, wondering how the cnbc app is. The iphone cnbc app is much better than cnbc is on tv. 

  64. 64
    crysball Says:

    Z,
     The Ipad  will run  anything  the  Iphone will run (if there is not a specific Ipad App released) and you can download  them  from the Apple  App store just like  downloading  for the Iphonne.
    In  IT  talk……….there is one way compaability  which allows  Ipad  software  to  run  on  the Ipad………and  in most application  the Ipad autiomatically compensates  to  fill  up the larger screen  of the Ipad.

  65. 65
    tomdavis12 Says:

    Z: EOG is up because you called it undervalued yesterday.  πŸ™‚

  66. 66
    zman Says:

    re 64. I like things that just work like the iphone/ipad. You see a lot of tech out there that does not.

    Tom = LOL

  67. 67
    cargocult Says:

    tap, tap, tap, this thing on?

  68. 68
    ram Says:

    Working

  69. 69
    elduque Says:

    I am busy trying to figure out why my short MOS long POT traded is not working.

  70. 70
    zman Says:

    Yeah, it's just that kind of day, I'm doing a little reading, not much to add, waiting for an exit on some BEXP calls but that's about it. 

  71. 71
    RobBanks Says:

    Z –  your SSN NAV of $2.25 looks intriguing. Why kind of discount to NAV should a little, foreign based outfit like this be priced at?
    In other words, how much share price value is the market missing?

  72. 72
    zman Says:

    Rob – tough to say, maybe 20 to 30% off is fair until we some more data on the Niobrara. Note that in a sale they could get more than 5K per acre for the Bakken. I'd normally give it a higher discount to NAV but given that a big chunk of that is cash I think 25% or so is fair. Once we get data, assuming it is good, the NAV should climb based on $/BOE in the ground and not $/acre. That should forced some more people to take notice. 

  73. 73
    RobBanks Says:

    re 72, thanks.
    BOP – do you think this big sell-off in the banks is related to that report a day or 2 ago that CDO's were sold with undisclosed bad assets in them, and that the banks might therefore be on the hook to buy them back at par? BAC being a main suspect. Banks dropping while mortgage insurers (who would be off the hook) soaring seems to indicate this might actually be driving things in the space today and yesterday.

  74. 74
    tomdavis12 Says:

    Z: RIG fleet status report released. Had down time but less than street expected. Stronger than market because of that.  

  75. 75
    tomdavis12 Says:

    Z: RIG charging XOM $704,000/day for a rig in the Black Sea. Now that's almost as much as the Yankees pay AROD.  πŸ˜‰

  76. 76
    zman Says:

    Thanks Tom – saw the report was out, had not looked over.

  77. 77
    zman Says:

    Out on those 10 BEXP $20s at $0.40. 

    Beerthirty. ZZZZzzzzz.

  78. 78
    BirdsofpreyRcool Says:

    RobBanks (nice handle!) #63 — yes.
     
    (Sorry about the delay… Got tired of watching paint dry and decided to take the afternoon off.  Mountain biking trails this time of year are just too beautiful to pass up…)

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