Market Sentiment Watch: Chinese GDP data came in slightly higher than expected (9.6% vs 9.5%) while U.S. earnings continue to come out hot from MCD to CAT. In energy land we have a couple of more followed names with conference calls and SLB reports tomorrow. The big earnings onslaught for energy comes over the next two weeks.
Ecodata Watch:
- Jobless claims came in at 452,000 vs 450,000 expected
- We get leading indicators and Philly Fed at 10 am EST.
Nicky Watch: I will start by saying that cycles indicate weakness into the 25- 27th October but that I expected Wed and possibly Thursday of this week to be positive. Now to the two EW counts. 1) The first one has us in a triangle. In that triangle we are in the b wave which should top out around 1183. Then we would see a c wave down to around 1163. If its an expanded flat we would see it probably go as high as 1191 and then retrace in c to 1159 again. 2) The other possibility is more bullish and has us in 1 of 5 of 3. Again topping out in this area, followed by a pullback to the 1171 – 75 area before moving much higher. There is a more bearish alternative but that is really going to require than we start to fall apart again in short order so I will come back to it if we see that happen here.
In today's post:
- Holdings Watch
- Commodity Watch
- Natural Gas Inventory Preview
- Stuff We Care About Today – NFX, CLB, SSN, RRC
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $5,200
- 100% Cash
- Yesterday’s Trades: None
ZIM (Zman Inefficient Markets portfolio)
- $3,400
- 2% Cash
- Yesterday’s Trades: None
Commodity Watch
Crude oil recovered $2.38 to close at $82.54 yesterday after the EIA reported an OK set of numbers with the highpoint being a large drop in Cushing, OK oil inventories and a boost in distillate demand. This morning crude is trading off slightly.
Natural gas closed up 3 cents to end the day at $3.54 in subdued trading. This morning gas is trading flat.
- Tropics Watch: There is another potential storm (Tropical Depression 19) brewing between Mexico and Cuba. Current forecast track calls for it to cross Mexico and go into the Gulf.
Natural Gas Preview:
I'm at 85 to 90 Bcf for today's storage number. Mild weather continues...
-
- Last Week: 91 Bcf Injection
- Last Year: 23 Bcf Injection
- 5 Year Average: 58 Bcf Injection
- 10 year Hi: 85 Bcf Injection
- 10 year Low: 18 Bcf Injection
The Street is at 86 Bcf.
EIA Oil Inventory Review
Stuff We Care About Today
NFX Reported (Yesterday) Good Quarter; Guidance Tweaked Higher
The 3Q10 Numbers:
- Production of 71.4 Bcfe vs a guidance range of 70 to 74 Bcfe
- CFPS of $2.94 vs $2.69
- EPS of $1.10 vs $1.05 expected
Highlights:
- Williston (Bakken): Prod now more than 5,000 BOEpd, up from 4,000 at mid year, says exit will be 6,500 BOEpd.
- EFS – no real new data
- Southern Alberta Basin – completed a horizontal, no data
- Granite Wash – 31 wells drilled, 26 producing, 5 completing, agg prod of 115 MM/d up from 85 MM/d last quarter
- Woodford – Activity still slowed due to prices, prod now 190 MM/d vs 220 MM/d net at mid year.
Nutshell: Another good quarter. NFX has been running hard of late but standing still relative to its production and reserve growth. I continue to hold it thinking it is undervalued, overlooked, and underestimated. In general, estimates rise here as management has both an eye for cost control and the ability to pull new plays out of old acreage ... they're not your late to the party so pay a high entrance fee kind of guys. Some day they will get bought. With strong positions in the Bakken, Alberta Bakken, Woodford, Eagle Ford Shale, Marcellus and overseas it just may be time for the Chinese to step up to the plate and take them out. They have partnered enough with CNOOC in Bohai Bay for those guys to have a feel and the Chinese and others are certainly testing the waters for a US whole company acquisition with all these JV's. And I'd hate to see NFX, the Rodney Dangerfield of E&P companies, go away but if it has to be, it has to be. The operations update was a little less colorful than usual so thinking they held some details back for the call. Will be interested to listen to Eagle Ford and South Alberta Bakken sections in particular.
Conference Call: Today, 9:30 am EST
CLB Reported An In Line Quarter
The 3Q10 Numbers:
- Revenue of $199.2 mm vs Street estimate of $208 mm and company guidance of $205 mm
- EPS of $0.79 vs Street at $0.79, and in line with the company's guidance on the 2Q10 call
- Record operating margin of 30% - they are guiding to this level for the 4Q as well
Highlights:
- Strong demand from Asia , the Middle East, and offshore deepwater West Africa
- Also mention increased demand for their services including perforation in the U.S. hotspots (Bakken, Eagleford, Niobrara all highlighted)
- All three segments grew again
- Notably, the mentioned receivieng hundreds of meters of cores from European and Asian locations ... this falls in line with my long term thinking on HAL and SLB and the infancy of the unconventional international industry.
- Cash continues to build on the balance sheet $168 mm cash ... look for continued share repurchases and quarterly special dividends.
- I should probably start looking at this as yield play ... they mentioned having returned $16 per share to shareholders since 2008. This year we've had a smallish common share dividend boost and repeated special dividends. Free cash flow continues to build here.
- 4Q revenue guidance of $205 mm with the Street currently looking for $208.5mm. Since they just slightly missed on the top line and since they are setting guidance a touch low to current estimates this may be a downer today. I'd like that as I'm not in the name but would be comfortable dipping a toe lower and since I may be about to take profits in one of my yield names, in the near term.
- 4Q EPS guidance of $0.80 to $0.82 vs $0.81 Street
Conference Call: Today, 8:30 an est
Other Stuff - Today, some thoughts on where things stand
- SSN stock trying to wake up from a post Goshen deal news nap. At present, the current stock price is comprised:
- of 65% ($0.80 / share) cash with the rest being
- Aggregate production from Bakken wells drilled to date plus other areas (about 84 Bopd net at last read)
- At about $100,000 per flowing barrel we'll call that $8.4 mm or $0.10 share
- or we can take my standard approach of $15 per BOE in the ground on 1 mm barrels or $0.18 per share
- Taking the mid point of those two leaves us at $0.94 of current valuation accounted for.
- That leaves the 17,000 Niobrara acres to carry the weight of the remaining $0.29 per share or $24 mm in value ... putting that position at $1,400 per acre.
- Since they just sold Niobrara acreage to CHK, acreage that may be inferior to what they retained, for $3,274 per acre, the discount above seems extreme.
- And you are getting the Over Riding Royalty Interest for free (could/should be worth at least another $30 mm ($0.36 / share)
- If anyone asks about the VYOG Niobrara wells I'd say that they are far away to the south and it sounds like the drilling was botched in the first two of their three wells. Niobrara activity remains high so the NBL's and EOG's must like what they are finding and the CHK's of the world who are just getting started have not been dissuaded.
- RMD convinced me to take a closer look at AREX ... slice and dice job next week.
- SLB reports tomorrow. Not planning to play as I'm a HAL fan for the moment but will note the numbers and listen in on the call.
- Bakken update part 2. This will be out next Monday along with the original piece, updated for the KOG acreage, some company specific comments on the 6 names in Part 1 and some more comparative data charts.
- RRC Operations Update. - Basically pre-releasing earnings.
- Another record quarter of production, up 7% sequentially from 2Q10 levels to 503 MMcfepd.
- Liquids comprised 23% of production, up from 19% in 2Q
- Rates of new wells in the Marcellus are better than expected, coming higher than modeled, and suggesting EURs are better than the company's standard 5.0 Bcfe type curve.
- They also mentioned decent looking results in their southwestern division from a Wolfcamp well.
- Hedge position for next year continues to grow, now 408 MMbtupd (about 80% of current levels) hedged at $5.56.
Odds & Ends
Analyst Watch:
- NFX - Stifel bumped its target by $3 to $65
- PXD - Stifel ups target by $10 to $90
- FST - Susquehanna cuts to Neutral citing strong run in shares.
SSN story posted here last week, up as a headline story here today:
http://finance.yahoo.com/q?s=ssn
Z, Re CLB:
These guys provide alot of the science used to unlock the shale plays. Plus they have ProTechnics that provides MORE tools to try and unlock the shale plays. I think you mentioned their perforations services to help solve some of the problems with Shale plays (high breakdown pressures on toe stages, etc). I think you are seeing a common thread, as long as the shale plays are around CLB will be there.
Talked to John Ely, one of the frac gurus in the world. He mentioned that one scenario being ran right now is that there could be 500 rigs drilling shale gas in Europe next year. Might look at major land holders there. I know that's a high rig count, pie in the sky sort of thing, but I'm pretty sure the Europeans want out from underneath that natural gas stranglehold that Russia has them in.
GDP looking like relative at these levels. Any thoughts JB and Z?
Thank you.
Unavoidably detained so will be listening to the CLB replay.
Tex – thanks much, you and Wyoming and a couple of others here are probably the only guys that know him. Thanks much for that color. My sense from HAL and WFT is that 500 next year would be way too fast too. There wouldn't be pumping equipment to do anything with all the wells once drilled at this point. Sounds more like a 3 to 4 year figure but I hear ya and it will go that way. Aubrey at CHK said they looked at over 100 unconventional reservoirs internationally in the last 2 years. Said nothing was better than the Eagle Ford (except Newfoundland) but also said he sees the same shale boom that took the US by storm a couple of years ago gripping stranded gas regions in places from Asia to Europe. He took a dig at HES/TRLG saying no one wants to drill in Bordeaux and he at FXEN as he said he didn't want to be drilling in Poland. But he did say it would happen, the int'l shale boom. It then makes one wonder about LNG facilities being able to export from the US, the viability of some being built today, and the long term price of natural gas should several Hayensvilles be discovered in BFE China. I still can't believe HAL or SLB hasn't scooped up CLB. You'll note they are measuring themselves on ROIC and come out top of all Service names listed by Bloomberg for the last 4 quarters. They generate lots of FCF and as you said, the business is not going to simply go away as long as we are in shale land.
re 3- should be relative "value"
Eld – So gassy. Results somewhat erratic. I'd rather be long SWN (which I still am with a half an opening position). Will listen to the 3Q call, could be forming a bottom. So could GMXR. Just not all that enthusiastic about either of them.
NFX call in 5 minutes.
Still waiting on NFX call to start, perused the FCX release, mentions MMR in conjunction to their recent investment, nothing new.
FCX looks to have had a very good quarter by the way, copper prices up = FCX happy.
Good color on the NFX earning release, Z.
BG39 – You must mean the nutshell because I didn't flesh out the operations update much at all. Wondering if S. Campbell has something up his sleeve today as the @NFX which is usually laden with operation data prior to a Q has only hedges this time.
NFX Notes
Pointing out that they didn't up their capex budget all year long. Production growth will be no less than 11% for this year, as guided. Stand and deliver.
Call will focus on 2011 …
NFX Notes 2
He's giving a preview of their 2011 plan
Sees 2011 challenged on the gas side
NG well hedged in 2011 (noted some new hedges in that @NFX)
Remain far more constructive on oil vs gas, gas stuff is mostly HBP anyway
Guiding toward 25% increase in oil for 2011 – big number
….
Was that domestic or total on the 25% Z?
ZTRADE – ZIM – WLL
Sold the WLL $100 Call for $4.90, up 21%.
BG – I think he said domestic, not sure, some loud person here was on the phone.
BOOM on the margins
NFX Notes
Still only running 4 dry gas rigs now
Woodford is still profitable at current prices … had thought it was a bit under, hmmm.
"We will not subsidize further gas drilling with hedges" … good.
2011 Plan
Focus on oil
Maximize margins
Plan for the future
…
EFS and SAB ops update coming up
Nvm
NFX Notes
Assessment programs – talk about 2 today, both potential game changes
Eagle Ford Shale:
added acreage a year ago for $400 / ac
15 wells to be completed by ye10
4 wells completed so far, will not make data public until they have a comprehensive plan in place, look for data in early 2011.
Southern Alberta Basin
Recently TD'd 5th well.
…
re 20 – yeah, sounds like early 2011 for a meaningful update on those two.
NFX Q&A
Pretty normal stuff, noting they will drill 20% more wells at Monument Butte due to drilling efficiencies.
NFX saying they have not yet drilled a 9,000 foot lateral in the Bakken, so don't judge them by the IPs just yet but also pointing out that they are learning and their immediate offset wells to original wells are coming in at 2x IP… not shabby.
…
market liking NFX this morning
NFX Q&A
Joe Alman asking the sandbag question. He's asking if the Eagle Ford is heavy oil. The answer is no. They said it is bitumin and that is shallow and has nothing to do with the EFS but is in the Maverick Basin. He said people who want to pontificate about things they know nothing about should stick to talking about their own plays. In other words, SHUT UP JOE.
re 25: Jajaja
Watching CLB, down $3 on the guidance, pretty typical for them to sandbag numbers, carries a little more weight today since they had a small revenue miss.
ZTRADE – ZIM – NFX
NFX – Added (10) NFX $65 November Calls for $0.37 with the stock up about $0.90. See site for details on the ongoing earnings call.
HAL working to fill the post earnings (which were strong by the way) gap down.
WHX through $23. Still mulling … letting it run a bit. Should not see news until first week of November on the distribution. As it rises, I am increasingly likely to punt, wait out the inevitable "they missed" pullback and ensuing analyst beatdown and then buy it back at a lower level and take or not take this dividend as the situation dictates.
NG numbers in 8 minutes.
NFX – we will live within cash flow in 2011 and deliver good growth.
Board hearing these comments on Bakken and Monument Butte for the first time in a public format on this call. They will stick to their normal schedule of providing next year's guidance early next year.
Wyo. oil spill hints at Niobrara Shale's potential
Oil spewing at well east of Cheyenne, Wyo., could be sign of Niobrara Shale's potential
Mead Gruver, Associated Press Writer, On Wednesday October 20, 2010, 6:38 pm
CHEYENNE, Wyo. (AP) — Oil spewing at a new well east of Cheyenne could be good news for other companies preparing to drill into the Niobrara (NY'-oh-BRER'-uh) Shale.
The Wyoming Department of Environmental Quality says oil surged through the well owned by Denver-based SM Energy Co. last Friday and sprayed from a flare stack for eight hours, blackening 15 acres of ranch land. SM Energy says it's cleaning up the site.
Mark Northam at the University of Wyoming says the accident shows the ground holds quantities of oil under pressure — something oil companies like to see.
Dozens of companies are preparing to drill into the Niobrara Shale near Cheyenne, hoping it will produce as much oil as the booming Bakken (BAHK'-en) Shale in North Dakota.
http://finance.yahoo.com/news/Wyo-oil-spill-hints-at-apf-2396836582.html?x=0&.v=1
Z: Just some quick comments from the NE cc. Poor quarter. Likely to be the low revenue quarter going forward. Things getting better gradually. Permits issued in GOM have been for shallow water only. No deep water yet. They are optimistic about continuing to drill for Pemex unlike your comments from WFT that thought Pemex is very screwed up. Biggest issue for entire industry is PBR. Nothing breaks until their election. They have a stated need for 28 rigs. Do they hire off the market or do they wait for their own 2 – 3 years down the road? Interesting point in GOM is if the leaseholders have 5 years to drill their lease, does that get extended for the moratorium or if not it could cause a bigger need for rigs as leases are close to expiration. My take for stock is a buy @ $28 – BV to $32. Company did buy 4MM shares at an average price of $32.67 this quarter. Not the growth vehicle that the Bakken Boys are. DO cc today @ 10AM and ESV cc @ 11AM
I sure miss that entity/person that was selling me that BSIC at .90-.99 cents earlier in the week….
RE NFX call, Hahaha good try Brian
Thanks much DRLink. SM has been drilling south of the old Silo field in southern Wyoming, due south of SSN's postion. In between lies activity from NBL and EOG and CHK.
For a map see slide 16 here:
http://www.samsonoilandgas.com.au/IRM/Company/ShowPage.aspx?CPID=1185&EID=68512529&PageName=Rodman%20and%20Renshaw%20Conference%20and%20Corporate%20Presentation
re 35, yeah, no joy getting any details on EFS right now out of NFX … I think that's wise, otherwise you get into people judging you on IPs with each release. Better to hit them with a swath of wells and a plan.
Jivey – yeah, and thanks for bringing it up as I have a list of ?s in with them and have not gotten a call back, time to rattle the cage.
Tom – thanks, tough time on these guys, wondering if bottom soon. DO was weak I heard too, haven't looked at ESV, guessing RDC will be tough too.
93 Bcf. Ugh.
NFX needs to cut this call off, too many comments ending in "no comment" on the Eagle Ford. They say don't ask, the analysts try to be cute. Gets old.
NG off 6 cents post numbers. Need winter now.
Storage now off 1.3% from year ago and up 8.4% vs the 5 yr average.
Storage now at 3,683 Bcf
Last year's peak was 3,837 Bcf
More mild weather and gas prices run into considerable headline risk.
Z: 37 DO not that weak today but is down the most YTD for the group. The dividend is the same as last quarter but down from April. Permiting process and BOP recertification process going slowly. ESV has performed the best because their fleet primarily shallow water.
Tom – isn't ESV in the process of transitioning to more of a balanced portfolio, adding more DW as a percent of business?
if NFX doesn't say anything about Alberta, it makes it easy for ROSE to do likewise.
NFX call ending, went on a bit too long. Will be interesting to see modeling changes flow into higher numbers tomorrow. There is going to be a bit of variability among the crowd as they didn't provide the 2011 spoon fed guidance but you can smell the double digit growth stewing.
Re 43. yep. Everybody gets chatty on the 4Q and/or 1Q11 calls.
Canaccord out with Permian piece, saying typical oil shale valuation wrong because of stacked pay . Est Bone Springs and Wolfcamp have 30+ billion boe recoverable. Recommending XEC and CXO for Bone Springs, PXD ans AREX for Wolfcamp even though there's no horizontal Wolfcamp in our models currently.
What's Bakken on top of Three Forks if not stacked pay I wonder?
Z: 42 Last thing they did was sell old JU's and add new high spec JU's. Wall St loved that move. I have a report from CSFB issued today. Will review breakdown of fleet and report back. Their call is 11AM est.
Bakkens starting to poke their heads back up. Biggest pullback was OAS which was knocking on $23 last week and is now coming off a quick trip to $20.
KOG getting a second day of upward move following the deal …a bit surprised but I think as it should be. Going to keep my recently added trading shares into the 3Q numbers as they will have a good chance to describe what they bought on that call.
West – thanks for the link last night and the comments. You are an invaluable contributor to the site.
Any news on SD, other than West's comments a week ago or so?
ElD – nothing I have seen but I'm out and not searching for anything on it. I have it on the watch list, no news I have seen other than the insider grants made reported earlier. They should be going on a war on costs, capping raises, halting stock grants, cutting everything that can be cut … doesn't seem to be happening.
Seeing some bearish comments out of the Street on the gas number and current situation. Not at all surprising and not wrong given my comments above. Thinking SWN may get hit pretty hard as they are still largely naked in 2011 and have had a little pop of late. The contrarian in me says gas is near the low but there could still be some sharp spikes that spook nervous stock holders as we approach a mild winter … and slowly approach it at that.
tropical storm Richard forecast to enter the GOM
Thanks RJ, it may just be able to reform once it crosses Mexico, not sure though, it is crossing a wide stretch of land.
Market going soft
GFDL has Richard as a Florida strike:
http://moe.met.fsu.edu/cgi-bin/gfdltc2.cgi?time=2010102106-nineteen19l&field=Sea+Level+Pressure&hour=Animation
hit fwd button
EXXI completely faltering on the storm news
That and the S&P backing off 10 points in an hour.
Z: 42 ESV's fleet is currently 41 JU's, 1 Barge & 5 UDW. There are 3 more UDW under construction. That is probably what you were thinking.
Thanks Tom – betting that works out to more of a balanced portfolio from a revenues and operating profits standpoint that the numbers would suggest, eh.
Z: Did you know there is a mutual fund that specializes in your Bakken names? The full name is Integrity Viking Williston Basin/Mid NA Stock Fund. Symbol: ICPAX. All the performance numbers are misleading. It just converted from a small cap growth fund to this. I don't know how long it has been a Bakken owner. They are run out of S. Dakota. I just heard about them yesterday. Will report back if I find anything interesting. Of course I have more faith in your ideas. Just curious.
I have read a few curious questions about mortgage put backs on here. I received an interesting note from Nomura with a pretty good breakdown of expected put-backs in monetary terms and explains how they are effected as well. Any interest?
OT – BOP, is there immediate news that you know of for CIGX? There seems to be relatively heavy options activity in the NOV and DEC 2's.
Tom – I did not know that. Will put on a screen and track going forward.
i would be interested in #63
NFX, now off. Group and market look tired.
From TBP
Army,
I’m sure you’re getting a lot of emails and receiving a lot of phone calls right now with the upcoming election. As a result, you’re probably looking forward to the day after Election Day. Well so am I. And here’s why.
Throughout the year, legislation in support of using natural gas to replace OPEC oil has been proposed by Senators in both parties—most recently another bill to accomplish that goal was filed by Senate Majority Leader Reid for consideration in mid-November when Congress returns for a brief legislative session. This bill represents a potentially important step to address our ever-escalating dependence on foreign oil as well as to help reduce our trade deficit, generate new jobs, reduce pollution and remove a critical national security threat.
This bill contains many elements of the original NAT GAS Act (H.R. 1835 and S. 1408) that we’ve been advocating for more than a year and enjoys deep, bipartisan support. It provides for incentives for purchase of natural gas vehicles; grants for the development of NGV infrastructure; as well as incentives for electric vehicles.
Many Members of Congress from both political parties have supported policies to get off OPEC oil and onto American natural gas over the past two years. They’ve been cosponsors of the NAT GAS Act or integrated elements of its policies into other pieces of legislation. They know that our continued reliance on foreign oil presents a national and economic security issue for our nation and continue to work together to get this important legislative process over the finish line.
We can get this done this year if Congress finishes what it started when it returns in November. We can’t afford to wait any longer—every day we don’t act is another $1 billion spent importing oil from overseas.
I’ll be back after the election to ask you to take action—because I think our time is coming.
-Boone
Strange-SWN stays even w/that ugly NG #
any news/analyst chatter on HK? still a rumor of equity deal being circulated? or just the gas numbers?
SWN – yeah, that is odd, thinking it will change over the next couple weeks if we don't see some weather. Never good to see the injection drag on longer than it is supposed to. At some point, if no weather, one of these Thursday's will be a killer for gassy names, unhedged or not.
Re HK – probably just the gas numbe. Oil is off pretty hard too in here, looks like topping action, big up, big down, big up. I just like oil more in the mid 70s than above 80 for now.
HAL holding onto gains better than I would have thought given gas and the pullback in commodities and the market. I think some people may be waking up to the fact that that was a strong quarter, that numbers are going up and that as 2011 EPS migrates to $3, the stock will show impressive EPS growth, and a forward multiple not much above 10x.
CLB down 4 now, still watching.
NFX off 50 cents. Profit taking on lack of news that wasn't supposed to come out although everyone wanted it to. Knew they should have cut that call off sooner as the repeated "no comments" grew tiring on the analyst crowd. Market of course is not helping as the S&P slips into the red.
TAT getting tattooed.
EXXI – announces exchange offer for all the convertible perpetual prefferreds.
Ok, anyone interested in Nomura's note this morning entitled Sizing the Put-Back Risk to Banks, please send an email request to jplaton@tristar.us. My assistant should get it out to you today.
Is this weakness in MMR related to storm worries? iyho?
re 76, probably more about NG price worries.
I'm out of pocket for the next 30 days.
Any thought to Puts on SWN
md – we are thinking alike. On a call, back to you in a bit.
Are you going on vacation?
re 80 – not until the last week of the year I think and then it will be the usual, boring action, short post, check the quotes once an hour type affair.
MD – Considering selling calls on it, also looking at a lower strike put to take into next Thursday's number.
Z: What is the highest number you can remeber of crude/NG. Currently 23.85.
i think the vacation question came from 77 what do you mean by out of pocket?
About 21
re 84 …. Ohhhhhhh. Um, meant 30 "minutes". 30 days, yeah, right, lol. Sorry about the that.
Tom – as you know I don't put a lot of faith in the predictive power of that ratio but I think I recall 21, maybe even 22.
SWN q3 on 10/28
ram #64 — don't know. Could be due to some news or decision expected on the decade-old lawsuit with RJReynolds. It's a small part of the story right now… but could be some nice (unexpected) upside, depending on what happens.
Been working on a private deal all morning… so missing the fun. Ugh. EXXI having to deal with the preferreds (that they never shoulda done)… tells you Schiller wants to clean up the cap structure b/c he wants to do something soon. No surprise… he has been projecting that body language for a while… and that XOM shelf package has been floating around. Someone is gonna pick that up…
Re 86, Z isn't allowed to take vacation.
re 90. Exactly.
MMR down to 50 dma, am adding some here.
A couple of Q's:
z – any good reason for NOG to be doing so poorly lately? It did run up pretty fast…
BOP – is there much dilution to EXXI with the conversion of the preferreds?
TIA
Rob – I think you answered, I'm not in options on that one so really, I don't see it as anything but an opportunity if it gets cheaper to add a second piece. Basically $15 to $19 move retraced to $17. May go another buck or so lower to the 50 day and then I get to add more. Nothing fundamental, nothing with oil price or the stock to justify a change of direction there. In their case, you'd have to be looking at a slow down of drilling in the basin and worse, not better well results as we are seeing as the operators in the play come up the curve.
94 – thanks, Z. I'm watching for a decent entry here after missing at $15.
RobBanks… no dilution at all. Preferreds have been trading in the money almost since the day they were issued (damn securities… nice buy, Eli!). EXXI tendering for the 8.77192 shares/preferred face value + accrued interest. However, EXXI is also having to pick up a pretty 'spensive dinner tab, to get the preferred to convert early… $19/share on $100 face value (about $13mm total bill). Basically, pre-paying the $7.25/share/yr due over the next 4 yrs (until first official soft call), discounted by the time value of money. [That is the way a holder should look at it, I would think… Eli, can you help out with any insight here?]
Z: I have never heard you discuss the drillers putting their activity on a confidential list ( tight hole ). I believe BEXP has many. Could you explain the concept?
96 – OK, thank you, BOP. Just wondering if the small hit EXXI is taking today was related.
BTW, thamks for all the work on EXXI; I've done well with it since joining the board.
Tom – sure. Many of the names we track in the hot plays will have several wells on the confidential list. When you look at plays like the Bakken, they are almost all on it, same for the Niobrara. Basically the O&G commissions of the states report that permits are filed, that a well was spud, that a well was a dry hole, and so and so forth. The confidential list is when a company doesn't want them to release production data on the well. Some states will keep a well confidential for say 6 months after initial production. So BEXP, CLR, KOG, NOG, NFX, EOG, OAS, etc are all going to have wells on the confidential list until the their time is up and they come off (or the company press releases the well or it shows up as an approx. value in some local paper). As West points out, operators can also just not report it at first and pay the fine for doing so which is generally peanuts. The idea is to keep your IPs under wraps until a time of your choosing. Especially if you poke a good hole and get big numbers and have not yet leased up all the nearby land which suddenly would get a lot more expensive on you.
RobBanks — glad EXXI is working for you. It has Most Favored Nation status in my portfolio… just love the oily production and the Ultra-Deep Upside.
Stock is down b/c energy is down and tendering for the preferreds is just one more piece of evidence that Schiller is "up to something." Mrkt hates uncertainty, I guess. But if Schiller is able to buy assets at anywhere close to his Mega-Cheapskate-History and finance them with a balance of new debt along with new equity, then the stock could actually go UP on a deal (think KOG). Not saying it will… but history is on Schiller's side on that.
We get SLB in the morning, no feel for the numbers there this quarter.
Pretty indecisive action today, love to get Nicky and JB's thoughts on the market here.
Beerthirty
Z: 99 Thanks. I'm in charge of questions when things are calm. lol 8)
Analyst Watch
NFX – Barcalys maintains Overweight – says shift to liquids is well under way
I added a bit more ATPG in this malaise today….seems to be one of BOP's good ideas…I actually looked at their fundies to day a bit…not that it does an old bast**d like me any good
jivey — what i like best about ATPG (other than the fact that they are oily) is that their money is now going toward drilling development projects. No more acreage acqutns or infrastructure buildout… just drill 'em and book 'em. ALSO, management owns a slug of the equity… and they did double-pretzle back-bends NOT to dilute their owership with new share issuance. Instead, they mortgaged their assets to the hilt, in order to hold onto the upside. At this point in the credit cycle, that can work out well for equity. Two yrs from now, I'll be worried about that strategy… today, not as much.
TEX ARES said they were bringing in John Ely to consult on the Wolfcamp recompletion Cinco Terry 1601 (slide 43) using new frac techniques, thinking the fractures were leaking off the pressure. This is a Nov. '10 project. Glad to know they got the best.
Tex, I meant AREX.
Marcellus Tax Dead…for now…
Thursday October 21, 2010, 4:23 pm
HARRISBURG, Pa. (AP) — A proposed tax on natural gas extraction in Pennsylvania "clearly is dead" for the year, Gov. Ed Rendell said Thursday, suspending at least temporarily what has been the state Capitol's most hotly contested debate in recent months.
The Democratic governor issued a news release that blamed legislative Republicans for what he described as their refusal to negotiate in good faith.
milepost — thanks for posting! I hope we have more Republicans who refuse to "negotiate in good faith" to raise taxes on other people. It's not like the state doesn't get revenues, taxes, and employment from those Nasty Energy Companies as it is. (mini-rant)
re 109 – thanks much, just saw.
Re 108 – RMD – thanks for the weekend reading
thanks for that color in #106…I took a decent position in it because I liked what I saw too and of course your predisposition toward it is what caused me to look….you've helped me and others on here a lot…
jivey — wow. Your kind words mean a lot. My overarching hope is that we can all make some decent coinage here. z's site provides something for a lot of different types of investors.
Speaking of "different types of investors"… I don't think all that much of "motley fool" (just my personal opinion), but I happened to see this tonight. "Time Arbitrage." It sums up what I (personally, for me) think is the best way to make money in this market. It is the more professional way of expressing my metaphor of "waiting in the weeds" to buy at your price… but then to let the value play out over time. Like EXXI and KOG and MMR… these are stocks in companies who are facing enormous value-enhancing projects over the next two years. I have no idea where they will be in two or three weeks… or even two or three months. But in two years, I think they will be a lot higher. Do I wish I bought MMR at $15.10-ish today (like john11) or more ATPG at $14.80-ish (like you) — of course. But the risk of NOT being in these investments now, with an eye on two years from now, is what I worry about.
I don't want to be telling "woulda, coulda. shoulda" stories…
Anyway, here's the link… it just happened to be attached to ATPG…
http://www.fool.com/investing/international/2010/10/21/2-words-that-will-crush-wall-street-over-the-next-.aspx
MCF…really holding up nicely within a strong bullish channel…MCF holds its column of X's on the current P&F buy signal until a print of $51, where it reverses into O's (but stays on a buy signal),,,support on the daily at $52, short term target the topside channel line, longer term the weekly is suggesting a $60 target…updated charts