Market Sentiment Watch: G20 Comments Juiced Futures Overnight. G20 officials over the weekend pledged not to competitively devalue their currencies. Looking at the dollar I would guess the US delegation was winking at everyone with their fingers crossed as the oath was taken. The last week of the month brings more energy earnings and the fear of, well, October, in the markets. Look for existing home sales to cause some trepidation in the markets early this morning although I must add I have not seen this many SOLD signs in front of homes in the last 2 years as I have in the last two weeks. Most likely that's just local or perhaps its a sign of seller capitulation combined with the continually falling rates. All eyes are likely to be focused on politics this week (can't help ya with a read there and don't want to get into that realm anyway) along with the jobless claims number on Thursday and the 3Q GDP number due out on Friday. Notably, we have not had a very Octoberish October. So far the S&P is up 3.6 % month to date. The only thing that's really taken much of a beating in our realm is natural gas (down 14% MTD and eying a test of the $3 handle at this point).
Note that this year I have not offered to eat a hat should gas fall to a certain level. The current problem with gas is obviously over production and a lack of Fall-like weather that is allowing what was going to be a decent peak for storage to linger on into an extended injection season. There is little more bearish for gas than sweating on the train platforms in the morning and seeing injections run into November. But longer term, production growth does appear to be stalling out in areas where it has been the driver like Louisiana where operators have done the math down to the acre, rig, and week to meet their HBP goals and are trickling the count lower both there and in East Texas in the Haynesville/Bossier plays. We get another view of gas production later this week and the things to watch for will be lack of growth in LA (maybe a small decline), the "other states", and Texas, and declines in the Gulf of Mexico, Wyoming, New Mexico. Oklahoma may or may not continue to slip sideways as Wash Play volumes offset Woodford and conventional declines. My sense is that gas traders will grow a little more excited when they see the following chart go from it's current loss of momentum stage into one of more pronounced decline. But for now, the easiest course is to get out of the way of the lack of weather, say why fight it, and sell until gas is cheap enough to prompt public curtailment announcements.
The Week Ahead:
- Monday 10/25: We get Existing Home Sales at 10 am (F = 4.39 mm)
- Tuesday 10/26: Consumer confidence (F = 50, last read 48.5)
- Wednesday 10/27: EIA Oil Inventory Report, Durable Goods (F = 2.5%), New Home Sales (F = 300K)
- Thursday 10/28: EIA Natural Storage Report, Jobless Claims (F = 450K)
- Friday 10/29: 3Q GDP (F = 2.1%), Chicago PMI (F 57%), Consumer sentiment (F = 68.5, last read 67.9)
In Today's Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today – Energy Earnings week 2 with comments, ----
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $5,200
- 100% Cash
ZIM (Zman Inefficient Markets portfolio)
- $2,900
- Positions: Calls in MMR, NFX, HAL
- 5% Cash
Commodity Watch:
Crude oil ended last week up 1% to close at $81.69. The 12 month crude strip was trading at $84.37. This morning crude is trading $0.50.
Natural gas fell another 6% last week to close at $3.33 as the mild weather prompted another record injection for this time of year into storage. The 12 month strip is now trading at $3.95, below the $4 mark for the first time since the early 2000s. This chart doesn't go back that far but it will give you an idea of the slope of the drop here. We should get another look at natural gas supplies from the EIA at the end of this week. This morning gas is trading off 3 cents.
- Tropics Watch: Richard became a Cat 1 hurricane before moving ashore in Belize and is now expected to pop out on the Gulf side early this week but I would bet it would have little impact on anything but perhaps Mexico's offshore oil production.
Stuff We Care About Today
Earnings Calendar
Energy Week 2 Bullets:
- COG - just keeping tabs on their activities, not active in the name but good management is worth listening to especially as this part of earnings season is fairly slow.
- EXXI - I own it. Looking for another quarter of production growth edging higher and strong growth in production capacity. We may hear some new data points out of Blackbeard East and just possible on Davy Jones 2. There is also the possibility that EXXI goes ahead and announces a working interest boost in some of its existing assets. Think oily, offshore but shallow water, longer reserve life than you'd expect, seasoned management, with the ultra-deep as upside.
- BRY - oily onshore, always listen but have not played here in a long time.
- PXD - Looking for updates on the Eagle Ford and Wolfberry/Spraberry. Stock has been strong and Street seems to be ready to send them higher. I'm not currently involved but their comments may affect other Permian and Eagle Ford players this week.
- WLT - Met coal producer, tremendous earnings growth in progress, producing all they can sell, had a small mine snafu last quarter that dampened production expectations through year end and the stock overcame it and has rallied on. I sold recently but am continuing to watch and learn and I intend to get long on dips in the near future.
- OII - Expecting the name to track higher as light is shed on the return to work in the deepwater Gulf of Mexico and elsewhere. I don't own it currently but may trade the options around earnings.
- WLL - I own the common in the ZLT and aside from the usually strong showing out of Sanish and Parshall and from the EOR projects in OK and TX I'm looking for an update on 1 to 4 wells (not sure if three of those will be ready in time for the pr) in the Lewis and Clarke area. One of these is essentially a twin of their early well here and should show a better rate and the others are in the fairway of this new core area, helping to derisk more of the 225K acres they have here.
- NBL - Looking for comments on the Niobrara. Also Israel. I still don't own it but it has moved up as my number 2 large cap idea after EOG.
- FSLR - I don't own it, just keeping tabs.
- SUN - In the land of boring energy names (refining), this is probably the most interesting right now, both seasonally for the play on heating oil (although a mild winter is in store) and from an asset rationalization angle. I don't own and would only play in their options for a short term play if their outlook is better than expected.
- SWN - I own it, results continue to improve on the EUR per well side and on the cost per Mcfe side as production climbs. At $4 gas, the Fayetteville Shale is profitable for them. Note that the Strip is now $3.95 and they remain only about 15% hedged for 2011. So either they go deeper into debt (which isn't a problem yet as their balance sheet remains solid and light levered at the moment) or they cut capex in the face of weak gas prices ... which while not a favorite from the crowd's perspective as it will mean a deceleration in production growth is the right decision in my book. Also expect to here their thoughts again on hedging at these low prices (probably not willing to) and on a possible sale of their remaining East Texas interests and some preliminary thoughts on Nova Scotia.
- ACI - another coal name, I will listen but am unlikely to act on the long side here as I find the BTU and WLT stories more compelling.
Other Stuff
- The Bakken Update (parts 1 and 2) will be out today ... will add a link to it in comments this afternoon.
- A new Catalyst List will be out in tomorrow's post.
- BP - selling interests in 4 deepwater Gulf of Mexico fields for $650 mm (all stuff they acquired from DVN earlier this year) as part of their asset rationalization plan. The interests are being sold to Japan's Marubeni Corp. Current production is 15,000 bopd putting the flowing barrel figure at about $43,000 which I'd call low given the quality of the assets (I watched all of these fields go from discovery to development under various firms stewardship including Nansen under EXXI's Shillers hand.
Odds & Ends
Analyst Watch:
- HAL - Credit Suisse raises target by $5 to $50.
- SBL - Credit Suisse raises target by $5 to $83.
- WFT - Credit Suisse cuts rating to Neutral, raises target $1 to $20.
- BHI - Creidt Suisse raises Target by $3 to $46.
Analyst Watch:
NFX – Stifel takes target up $3 to $65, rating Buy.
OT…Naples FL RE on fire…at 2001 prices and falling —
http://naplesinsider.com/
Berry Petroleum enters agreement to acquire ,300 net acres in the Wolfberry trend in West Texas for a combined purchase price of $180M ($34.35)
Berry's proved plus probable reserve estimates associated with the forty-acre development of the properties are approximately 35M barrels of oil equivalent with crude oil comprising 76% of these volumes.
Upon completion of the acquisitions, the properties are expected to add approximately 2,200 barrels of oil equivalent per day (BOED) to Berry's production during 2011.
The first three years of expected production on these assets has a hedging floor of approximately $87 WTI which should allow these assets to generate operating margins of $62 per barrel.
The company's existing Wolfberry assets, acquired earlier in 2010, are performing in line with expectations and production is 1,700 BOED today. With the acquisitions announced, BRY now expects production from its Permian assets will grow to 9,000 BOED during the next four years.
With this acquisition, BRY's leverage should be in the range of 2.25 to 2.5 times EBITDA in 2011
The effective date of the transaction is October 1, 2010 with closing expected in December 2010
Production from the properties to be acquired is expected to be approximately 1,200 BOED at closing. Contribution to the Company's fourth quarter 2010 production will be minimal given the expected closing date.
Approximately 90% of the 2011 capital is expected to be directed towards the Company's oil assets targeting oil production growth of at least 20%.
Berry expects its total average 2011 production to be between 37,000 and 39,000 BOED.
Of the expected 2011 production growth of approximately 15%, the acquired assets should contribute 6% with organic growth comprising 9%. Production volumes are expected to be 70% oil, which should drive corporate operating margins to $33 per BOE.
First Securities is the latest finance house to take a red pen to its tanker rate forecasts following a difficult period for owners.
It has also sliced back its profit forecasts for tanker titan Frontline, predicting it will slip into the red in the final quarter of this year.
In a note to clients First Securities says it now expects VLCCs to drag in just $20,000 daily in the final three months of 2010.
In this depressed environment Frontline will report a loss of $0.09 per share, it predicts.
For 2011, First tips VLCC earnings to average $32,500 daily. This compares with its previous bet of $38,750 daily next year.
Frontline has only posted one quarterly loss in the past seven years, a $5.6m reversal in the third quarter of 2009.
KOG — heard that Lynn was making the rounds of Institutional Managers on the East Coast last week. Seems some people liked what they heard. Also, confirmed that the acquired production (about 500 b/d) is most definitely NOT included in their 2010 projected exit rate of 2,500 bbls/d. This is the number — depending on how many of their additional wells they can get completed by year end — that has the potential to be 1-1.5k b/d higher. People are getting excited about this possibility… as well as management's ability to add acreage in their core operational area. Go, Koggers!
Re 3, 4. Thanks much.
PXD on the tape with a midstream deal in the EFS, could garner some positive attention today.
FBR on SLB – says they see margin improvement from the E. Hemisphere in 2011.
Thanks for the update BOP.
ATPG — getting a bit of a pre-mrkt boost from higher oil prices and news that GE is stepping up its oil and gas investing by offering loans for development drilling. ATPG doesn't need to borrow additional monies (for the foreseeable future), but knowing there is another backstop out there puts some more support under the developmental story here.
Would love to see ATPG break through the $15.50 ceiling again… and hold it.
any idea who the seller was, seems to be a good price
>http://finance.yahoo.com/news/Berry-Petroleum-Enters-bw-3807442140.html?x=0&.v=1
>http://www.bloomberg.com/news/2010-10-24/supertankers-face-longest-losing-streak-in-17-years-as-frontline-shuns-oil.html?cmpid=yhoo
The spread between the first and sixth Brent oil contracts traded on the London-based ICE Futures Europe narrowed to an average of $1.93 a barrel in the third quarter, from $5.48 at the start of 2009, spurring traders to remove almost all the fuel stored at sea and returning ships to compete for business. The spread has narrowed to $1.81 so far this quarter.
re 9 – sounds like a group of private sellers, acreage is pretty small in the big picture.
GE Capital — they have lots of money. Lots of it. They shoulda made this decision a year ago… before the debt market fully reopened for business. THAT is when GE Capital is at their best. Now… not so much. Only the smaller private guys will probably take GE up on their (typically lung-rippage) "kind" offer of capital and/or well participation. I know some of the smarty-pants guys at GE Capital (they really ARE smart, by the way)… but they could have really been a contenda in this area, if they revved up a yr or so ago. Probably coulda bought into JimBob's Ultra-Deep Play, back when JB needed some financial backing. OOPS.
Will be interesting to see if KOG can sustain this breakout, weekly chart looking like mid $5s test is in order, not that I'm a chart guy but that looks like an obvious level to take out, the mid 2008 peak. The other Bakkens are doing that now.
KOG — tough to believe that just a little over a month ago, you could buy all the KOG you wanted for $2.50. Kudos to those who did!
How to crush a fledgling recovery:
http://www.marketwatch.com/story/mortgage-interest-tax-break-faces-ax-report-2010-10-25?dist=beforebell
No mortgage interest deduction, no child tax credit, no pretax HSA. Wow. You want to kill the housing market and retail sales? Then pass this stuff.
ZMAN – Is KOG the next BEXP? Does it appear that growth is similar?
ram — just from a balance sheet perspective, KOG is not the next BEXP. BEXP is a highly-leveraged company (and this almost took them under), but (like ATPG) they made it through the liquidty trough… and what happens when you own a lot of assets that are debt-financed? "Leveraged returns on equity." BEXP was a fairly unique situation in the Bakken, imho. That said, KOG hit a low of around 16cents, back when BEXP hit $1. So, seems the little Kogger has already kept up with Bigger Brother BEXP.
re 14, I was a little slow and scored my trading shares at 2.95, holding those a bit longer but plan to keep the core for quite awhile.
re 16. KOG has less running room in terms of acreage but is actually leaping up more quickly than BEXP did. I think the lower acre count will hold the stock to a less $-wise meteoric rise but on a percentage basis I still think $10 is doable on their current leasehold. Of course, they will reinvest cash flow into land and the problem is that they will have to pay an increasing $/acre to do that. So again, I don't see the same kind of $1 to $20 rally we saw with BEXP off the lows, say in the next 12 months, but it should still be a nice run.
with the 1 yr strip under 4 and spot approaching 3, you have to wonder if producers dont start shutting in ng. I wouldnt sell it at these prices
kog looks like it will open strong
#17 — I was looking backward on BEXP's balance sheet, by the way. That is why USEG got to buy into those well participations so cheaply. At the time, BEXP needed the cash to drill AND to keep their debt holders paid and happy. I would not called them "highly-levered" right now… even if Moody's does (with a Caa2 rating!!). The Moody's rating has more to do with "size" and concentration of assets.
Thanks BOP and ZMAN.
Re 19 … yeah, that's what I was thinking about with my comments. Conventional gas producers have got be headed back to 0 rig counts now, especially the private ones.
Front and Center Watch:
SSN – second day of waking up. We do have a potential catalyst there this week in the form of Niobrara comments from NBL. Should take a little time to flow into the stock as they are pretty far off the radar of most traders/investors if anything positive should come out of that PR or CC.
HAL – still in recovery mode. Thanks Credit Suisse for the upgrade.
WHX – potentially on the chopping block this week and next if it rallies for all the reasons given in the last week. Like the name, don't like the analyst coverage here. Better to punt pre miss and rebuy pre dividend. Probably too cute for my own good on that by why round trip the heady gains we've had here?
KOG – in full fledged breakout mode. JB, any thoughts?
BOP re:GE Capital…………Lung Rippers.
GE Captial was 'GOLDEN' and 'could do no wrong' for an extended period of time within the GE Hierarchy…………..However, after things went bad and GE Capital almost took GE Down……… the pendulum swung and 'GE Capital could do no right' and risk aversion became so much of a driver that deal approval would get pushed way up the pyramid………………and many deals were lost due to the number of people who had to sign off (i.e. you could avoid personal career risk if you let the deal die).
The micromanagement reins have loosened somwehat,,,,,,,,,,,,,but GE Top Mgmt is a victim of their experience.
This is the 'ORGANIZATIONAL BEHAVIOR' dilemna GE finds itself in from what former colleagues in GE tell me.
Other headlines that will get people to the polls this week:
http://news.yahoo.com/s/ap/20101024/ap_on_bi_ge/us_employer_health_plans
BTU breaking out, WLT at 90. I may take a small call position before the WLT call as it could easily move to $100.
ice ice baby, buy road salt
http://www.accuweather.com/blogs/news/story/40461/winter-forecast-battle-zone-fr-1.asp
Analyst Watch
BRY – Susquehanna raises BRY to Positive.
crys — absolutely 100% agree with #25.
NFX breaking out as well, new 52 week high, options from last week are the $65s and are now slightly green. Continuing to hold there and in the ZLT. Numbers should continue to rise there for the next several weeks as analysts mull partial 2011 capex guidance. The name is becoming oilier too, putting higher up on the investor wishlist for the Christmas season.
Hmmm, I guess all those SOLD signs were telling after all, existing home sales see biggest rise in 28 years.
Existing home sales up 10% to 4.53 mm vs 4.39 mm expected.
reef — GST just not feeling quite the luuuuuuuv that the rest of the Energy Sector seems to be basking in. However, if they can snag a completion crew for that EF lateral, then it's Katy Bar the Door, methinks. So… do you think we will know (or company will announce) when they get that crew??? Or, will it be Secret Squirrel until they get the well completed and tested… thanks!
LINE should have been on the calendar for this week, Thursday.
This means we should get the 3Q distribution tomorrow. Distributions have been $0.63/unit. Tomorrow's could be same or could be up to $0.66. They've strongly suggested they will get back to raising it … I say no time like the present, Street says it will take another quarter before they up it. Last quarter they raised their guidance for growth due to outperformance of the GW wells, should see more big well results this Q as well.
Someone asked last week about NOG's underperformance, my response I think was "noise and it's had a good run" and here we are at an all time new high today at 19.50.
MMR – beginning a recovery after the "water issue" slapped it last week. EXXI reports tomorrow.
Hey Crys, did you have a list of SDM names for the slice and dice piece?
BOP – on ATPG. now that we've had the well put on line and the hub monetization, all I have for them in terms of catalysts is another well at Gomez this current quarter. You have anything else? Thanks.
musing… it will be kinda fun if Joe Allman goes after Schiller about the "water issue" on the conf call. John is less of a Mumble Mouth than JimBob… I think he could set the record straight, once and for all (until the next time an analyst does a Stupid Pet Trick on a conf call… happens all the time). Schiller is reported to be "mad" at the skittishness and short-term-edness of the "investment community." Well… all i can say is You GO, Guy! And Go Git 'Em!!
BOP- Have you read
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Thoughts from the Frontline Weekly Newsletter
The Subprime Debacle: Act 2, Part 2
by John Mauldin
http://www.frontlinethoughts.com/article.asp?id=mwo102310
"All those subprime and Alt-A mortgages written in the middle of the last decade? They were packaged and sold in securities. They have had huge losses. But those securities had representations and warranties about what was in them. And guess what, the investment banks may have stretched credibility about those warranties. There is the real probability that the investment banks that sold them are going to have to buy them back. We are talking the potential for multiple hundreds of billions of dollars in losses that will have to be eaten by the large investment banks. We will get into details, but it could create the potential for some banks to have real problems."
In other words PIMCO, Freddie etc are going after BAC. BOP do you agree this could have a pretty nasty impact on the market? (hence our oil stocks)
CHK- Still no love.
cape rates are still firming
http://www.tradewinds.no/drycargo/article569307.ece
ATPG has completions expected for 4Q2010 and 1Q2011… not sure how they are exactly distributed. A lot depends on what the BOEMR "lets" them do, at this point… which is why ATPG was a fave of the Short Crowd in the face of the moratorium. Time value of money (in this case, cost of funds) vs time value of getting production on line.
whhps sorry z..I dont know what happened with that posting
Thanks Bill – watching BALT, others, firm as well
Thanks BOP.
Will be quiet for a bit, going over Cat list updates.
S&P went to 1195 and halted, pulling back now.
bop
what are your expectations for earnings and cashflow for exxi.
DrLink #40 — no. I think they will not let this get to the level of a Lehman Bros. I go down in history as saying that Lehman would NOT go under… and it should not have. But, when FEAR creates a run on the banks, a lot of innocent (even if they aren't 100% innocent) players get trampled. If you get wholesale put-backs, this would have the affect of creating another run on the banks. That shouldn't happen… but it's time for the courts to weigh in on what "reps and warranties" really means in the practical world. Courts don't move very fast… that is the dynamic tension that is being created here. This mess WILL be fixed… question is, can our system keep the PANIC Level from accelerating before the fix is in place?
I didn't think the wolves would bring down Lehman either… but, wolves are numerous, dedicated, run in packs, and go into a frenzy when they smell blood. Just having passed "massive financial reform," it would look pretty stupid if the Govt Entities tasked with keeping runs on the banks from happening, can't deal with this issue. (I have my personal opinions on this… but, at least THIS "systemic risk" is pretty well known at this point).
Long rambling answer. Bottom line = I am concerned and watching. But this should not be issue that derails the recovery. Unless headlines and hedge funds can outrun a (sleeping? ignorant? stupid?) Fed and recreate the Lehman Panic in the mortgage securitization sector. Could happen… but, we are pretty fresh off the last major war. I think (hope?) Ben and Friends actually learned something. (ha. I'm talking myself into being worried now…)
bill — #48… would like to see EXXI clock in at 28k/d average production for the quarter. Other than that, Street is looking for $1.06/sh in cash flow and $81mm in EBITDA. I'd be happy with those numbers.
BOP – I would too, Schiller put productive capacity at 26,000 BOEpd in October though so not sure how we come in that high, am I missing something or do you think he was bagging the Street.
z — i know… just musing what i would like to see… hoping he can point toward 28K as a near-term milestone.
Thanks BOP, didn't know if you had a squirrel camera in place or not, lol.
Trading is slow. Will try to get a comment from Nicky on the S&P. Looks to me like a 1200 test is inevitable.
In other news, Intern #1 got her first hat trick this weekend, scoring 3 goals in the first half before the opposition decided to sweep her knee, sidelining her for the rest of the game. Unfortunately, they don't give red cards in U8.
Something is going on with SD – anybody hear any rumors?
WHX above $23. Step by step, inch by inch, I get closer to punting.
ELI or anyone on MHR, any reports from the field or elsewhere on the Gonzo #1 well, their first EFS production? Company says its on line but gave no rate. To me that's um, well, a bit of an oddity if you have a good well. More wells on the way I understand but surprised that such hypesters would not promote the heck out of a good well. A cruddy well, well, that I would understand saying "yeah, it's flowing" and leave it at that. I didn't listen to their last presentation but thumbed through the presentation. Any comments on this would be a help. Thanks.
54, Could they have been the sellers to bry?
Bill – maybe but it is not a lot of acreage and the press release mentions a number of sellers and that usually indicates LLCs and the like selling small bits.
exxi cashed in hedges in q3, >Recently monetized certain gas hedges locking in ~$17MM gain and im sure they lost non cash mark to market on oil hedges
they are forecasting 400 m ebitda for the year
West – any thoughts on REXX's 1st Niobrara well being completed in time for the 3Q call on Nov 1? I saw the pr on the tubing problem, have not heard any follow up to know if they have it sorted yet.
BOP – OK, I admit I had to google "Secret Squirrel" 🙂
oct 1 they reported
Recently monetized certain gas hedges locking in ~$42MM gain
Z, list of :
SINGLE DIGIT MIDGETS
OIL & GAS EXPLORATION
SYMBOL
NAME
AXAS
Abraxas Oil & Gas
BSIC
Earthstone Energy
CXPO
Crimson
EGY
Vaalco Energy
GST
Gastar
KOG
Kodiak Oil & Gas
LEI
Lucas Energy Inc.
MHR
Magnum Hunter Resources
SSN
Samson Energy
SD
Sandridge Energy
USEG
US Energy
Dman — ha! Forgot the term was from an old cartoon show. I have one of those really cute-girlfriend types in Texas (the kind that plans parties and decorates expensive rooms for a living) who when she wants you to keep something Really Secret tells you to "keep it Secret Squirrel." Or, something Top Secret is called "Secret Squirrel." The term just makes me laugh… hadn't thought of it in a while… but seemed like a good place to use it.
i think exxi took off all their gas hedges
OK thanks, SD probably won't be on there … maybe but probably not. The rest are OK for that though.
bill — thanks for the reminder on EXXI. I think I recall them saying that at one of the last presentations or two, yes. Seems like a smart move, on their part… they have the oil production to cushion them, if nat gas falls farther… but, at some point I think gas will head up a bit… usually does, from Sept to Nov. May not be working out exactly that way this year… but at some point, gas should be higher (given the 80%+ decline curves of the shale plays).
Re 65. They didn't have much anyway. They are oily and still have significant positions there. See slides 27, 28 here:
http://files.shareholder.com/downloads/EXXI/995131611x0x409076/3aa0d676-84c5-40a1-a4e5-926fb463a89a/IPAA%20Regular%20Book%2010.7.10.pdf
They need to alter those two to show prices by the way, would be a help.
RBC out with a short piece saying take profits in the Bakkens b/c they've run … naive.
If you normally don't see a name on the Cat List that you'd like to see, please put the name in a comment today. Thanks.
Exxi, one thing that gets overlooked with all the attn on BBW and Davy Jones is the nice increase in volumes from acquisitions and reworks
I think exxi does better than 26, say 26.5 m boe/day but lets hold it at 26 m boe
Last year first qtr they did 10 in oil and 5.5 in ng–so at 26.0 ng would be about 8.3 for ng and oil 17.7 is a huge increase in volumes
so oil volumes will be up 75 to 80 % qtr over qtr and 50 % on ng
So bottom line they will have nice headline numbers EXXI VOLUME SOARS 70 %.
DJ and BBW is icing on the cake so a different situation than mmr.
here are the last 5 qtrs for exxi
Natural gas (MMcf)
48.2
48.4
40.7
33.2
41.1
Crude oil (MBbls)
17.3
17.3
14.2
10
11.9
Total (MBOE)
25.3
25.4
20.9
15.5
18.7
Percent of sales volumes from crude oil
68.4
68.3
67.6
64.5
63.6
Oil rally fizzled, up only a dime now, NG off another 4 cents, trading feels pretty directionless, geared towards profit taking. Big bumps in equities were on light volumes and then no follow up. All eyes still on end of week data.
Thanks for posting, Bill.
That's why I think EXXI will up their exposure to the MMR Ultra-Deep Play only if they do it in conjunction with an oily-property acqtn. To keep the "balance" right… between oil and nat gas and between exploitation and exploration. Lots of ways to grow = why I like this stock so much.
Z- not sure if this was mentioned (or even matters), FBR upped their target on NFX to $72.
Rob – saw the Stifel upgrade, missed the FBR one, thanks. Stock holding up well during the market pullback.
Re: #24 KOG….looks fabulous….taking a rest at the steep topside daily channel resistance line at about $4.40…looking at the 30 min chart (updated), this area has been tested about 3 times and is currently consolidating today in a tight bull flag, aggressive long could consider long trys at $4.35, daily support, lower channel at $4.10…longer term P&F price target at $8, I also really like the P&F technical structure….
Thanks much JB, will go vote
SM up nicely today, could be follow through on that gusher news last week in Wyoming.
Thinking about the big decrease in gassy cash flows in '11, as Simmons calculates their peer group goes from 53% hedged in '10 to 27% in '11 and wondering if these are figured correctly into Street expectations. Over 60% in '11: DPTR 61%, DNR66, NFX 64, PXD 94, RRC 62, SD 77. 40-60% are BBG41, CLR41, GDP 46, KWK 41, . Below 20% are DVN 9, EOG 11, GSX 9, GPOR 0, OAS 0, PQ 0, PXP 0, SWN 18, SGY 17.
A few cos have hedges at much lower avg. prices: EOG $ 10.27 to 5.44, SD from 7.12 to 4.72, SWN 6.83 to 5.61. The other price changes were smaller or up, unless the % hedged went to 0%.
Something I'll listen to during the 3Q calls.
JB – voted. Market action = wowboring, grabbing some lunch.
re 80. Yep. Also why I like the HK as they are significantly gas hedged for 2011 and of course, LINE who is almost fully covered.
Skirting the process watch:
http://www.marketwatch.com/story/us-proposes-truck-bus-fuel-efficiency-standards-2010-10-25
EPA proposing new fuel efficiency standards. He guys, why no look at natural gas?
JB – when you get a chance could you look at CLB? Good quarter after quarter after quarter, guidance was a little conservative this last time, knocked the stock off recent highs, looks to be settling in now. Thanks.
re 80- What the natural gas market needs is for the producers to be less hedged. That way they will be less inclined to keep producing. I am thinking that Z is going to be right about mid 2011. It will be a combination of less drilling and less production. I don't know where the bottom is, but I think we are in for a large rally in Nat. Gas. sometime within the next 3 months. The market will anticipate the change in fundamentals that is going to occur.
Big question will be how much the higher price of nat gas will offset the lower cash flows. My guess that the stocks will ignore the cash flows and will reflect expectations.
re 85. The market will generally "look through the trough" better for the bigger names. As long as oil doesn't fall at the same time. If that happens they all get hit. I think we will linger below $4 for awhile unless the forecasts for this winter (warm) are wrong. But by Feb/Mar I would expect renewed strength in the gas markets.
Z, would like to see XEC on Catalyst watch.
Thanks.
Will add it.
Z: re LINE quarter. VNR declared .55. No surprises.
Hey Cargo, on that kind of thing could you post a link instead of pasting their text? Thanks.
I'd like to see you follow ECA more and/or see them on the catalyst list.
Z: As of 9/30 top 5 positions in that Williston Basin mutual fund. CRR, BHI, BEXP, OAS & WLL.
VTZ – if I could figure out what makes them tick from a stock perspective I would. I liked the last 2 quarters. But they softsold this quarter on the 2Q call and then pulled #s lower on this call. Which the market was not quick (so far) to forgive. From a catalyst standpoint, they are so big I don't see a single catalyst like a well that will move them. On the other hand, they are something like 96% natural gas, so when gas rallies, so should they.
Apologies.
http://www.bullmarket.com//newsflash.php?id=497
Tom – what's that ticker again for that fund?
LINE, as a reminder, should report their distribution tomorrow.
WHX should post theirs on or about Nov. 6.
Cargo – no apologies necessary of course, just trying to keep from getting in hot water. Thanks.
I must be tired, the link is for an update on RRC.
Yeah I guess you don't have CHK on the list either… fair enough.
V – I have EOG and SWN though, which are big caps. I just used to covered then and never did cover ECA. Happy for the prompting, will go back through notes and put it on the Cat list when I come up with something, probably not tomorrow though.
Z: 95 ICPAX
Thanks Tom
Stepping out for 30 min, back before the close.
z – I wasn't able to read the board for several months, due to busy summer stuff, so I apologize for this question.
Did LINE get a good price on their Wolfberry acquisition (which hasn't yet closed)? I take it that it's liquids rich acreage, and offers some E&P type upside.
Wow! If you can't get your legislature to tax 'em, just starve off the revenue, i guess.
According to several sources, Governor Rendell is preparing to sign an executive order imposing a moratorium on further leasing of state forest land for Marcellus Shale gas drilling at a rally at Penn Treaty Park in Philadelphia tomorrow afternoon.
http://citypaper.net/blogs/clog/2010/10/25/breaking-rendell-supposedly-to-sign-moratorium-on-leasing-more-state-forest-for-gas-drilling/
File under — "Monkey See, Monkey Do"…. too bad the first monkey is our own Kenny Salazar.
=====================================================
Gabon calls halt despite significant interest in deepwater round
2010-10-25 19:29:46.984 GMT
　
Oct. 25 (IHS) — Just two weeks before the launch of the 10th Deepwater Licensing Round, the Ministry of Mines, Petroleum and Hydrocarbons for Gabon suspended the entire process, citing the need for better economic and fiscal terms. This move came as a complete surprise given the substantial interest shown by the oil industry in the development.
In preparation for this round, CGG Veritas acquired 2,704km of 2D data in the northern zone and 10,000km of 2D seismic in the southern zone. Gabon’s ultra deepwater has significant untapped potential in a structurally complex setting, particularly in the pre-salt section which is poorly imaged by existing seismic data.
Oil Ministry spokesperson Julien Nkoghe Bekale told Agence France-Presse (AFP) that the delay has been linked to the explosion on BP’s Macondo oil rig in the Gulf of Mexico in April. The Gabonese government does not wish for something similar to occur in its waters, and therefore has decided to set up a code of rules pertaining to security and environmental concerns.
Gabon is highly reliant on the oil sector, which accounts for 60% of its national revenue. Should a disaster on a similar scale to that of the BP oil rig explosion ever occur, and oil production be halted, Gabon’s economy could be crippled.
BOP: Do you know any of the names that might effected by the Gabon news?
EGY is offshore and onshore Gabon… but they already have their concessions. Think it is just a rounding error for the bigger guys who play in the deeper water. But anything that keeps changing the Rules of Engagement for companies spending mountains of money on long-term projects, doesn't make anyone feel more confident in making that investment. In a way, this might make EGY's concessions a tad more valuable… in that they are in shallow water and onshore.
It's just that EGY has always presented the Gabonese Govt as "stable and practical." And anyone who thinks Ken Salazar is worth emulating, is neither, imho.
Rob – that deal got canned.
The CEO of EGY has in the past stated their interest in bidding on the Deepwater Gabon concession, but this would seem unrealstic IMHO as the Risk/Reward releationship seems disproportionate for a SDM.
109, thanks. I'm seriously out of touch. Sheesh.
Z you got your wish on LINE
Good call Z;
LINE Linn Energy LLC increases quarterly dividend by 4.8% to $0.66 from $0.63 ($32.88)
Alfred Sorenson, the President and CEO of Galveston LNG is speaking locally tonight although I can't attend. This is the terminal, in Northern British Columbia, that will liquefy Western Canadian natural gas to ship to Asia.
I would have liked to ask him some questions about the NG market for sure. I have some friends attending so I might get some interesting updates for tomorrow.
LINE – boosts dividend by 5% to 66 cents (up 3 cents, top of my range). I think it was Citi who a couple of weeks back said there would be no increase. RMD, you sent the piece calling it no way on LINE, I will go look that up since it will be another analyst for whom I do not have to listen, lol.
Thanks JOHN, RMD, I can't find that email from you regarding the analyst who was adamant that they would not boost this Q, please let know who it was if you remember. File him among the "overly confident and wrong" … a bad combination.
VTZ – Is that Kitimat? Would appreciate color on timing.
APA punting people at ME, looks like 80 jobs. Wonder if Schiller can pick up some talent on the cheap.
Z: Richard Roy @ Citi on 9/15 said LINE would not raise. If you want the report , let me know. Taking lessons from Gil Yang.
Tom – thanks, thought it was Citi, would like to see it as I must have used up my original copy in the loo.
QEP on the tape with an ops update, summary in the Tuesday post.
KOG on the tape admitting the deal is with Peak.
RE 117 – Yeah it's part of the Kitimat JV. I gave a list of questions to my friend… hopefully het gets some good commentary.
ATPG — list of catalysts in 4Q
1) MC 941 #3 (at the Telemark Hub) put on production, estimated 7-10k boe/d, came in at "7+" — DONE
2) Two more wells already drilled, just need to hook up to production… MC 754 #2 (at the Gomez Hub) and Garrow G-2 (UK)
3) with the addition of wells mentioned in 1 and 2, 4Q10 production exit rate expected to be 30-40k/d, up considerably from 21k/d exit rate on Sept 30th
4) Need to get permits to re-enter two wells at Telemark, MC 941 #4 and MC 942 #2. These wells have already been drilled to 12k feet, just have to re-permit them in 4Q10 before being allowed to complete in, hopefully, 1Q11.
EXXI news out..
http://finance.yahoo.com/news/Energy-XXI-Reports-Unaudited-pz-376143805.html?x=0&.v=1
exxi headlines
– Quarterly volumes rise 67 percent year-over-year
— Fiscal 2011 first-quarter EBITDA tops $75 million
— Exploration and development program advances
loss due to stock awards– will these guys ever give shareholders a break
production of 25,900 barrels of oil equivalent per day (BOE/d). The loss includes approximately $7 million of higher performance-based compensation expense primarily linked to the company's rising stock price.
EXXI 1FQ11 = some better, some worse than expected… no negative surprises and guiding that current production rate is up from 26k to 27k boe/d currently. EBITDA missed 80mm and came in at $75.7mm. Sales better than expected at $144.0 (vs 141.9 expected). Operating income a little light in the loafers at $21.6mm (vs $22.2mm expected), but could be due to a little higher G&A and/or DPR than the analysts models. EPS doesn't matter to me here… but it came in at -4c (vs +2.8c expected). Cash flow per share from operations came in at $1.53 (vs $1.06 expected) but, as Bill pointed out, that includes about 67c per share of proceeds from sale of hedges. So, really about 86c per share.
EXXI = agree with Bill, G&A was a bit of a butt-biter. Other than that, report came in OK. Nothing in operations update we don't already know… so will be listening closely to conf call tomorrow morning. Story remains the same, not disppointed… just waiting for it all to play out. I remain patient here.
ga is about 14 % of sales and is out of control, imho
operating income was 9.07 per boe down from 12.25 last qtr as higher ga took its toll (2.10)
revenue was flatish at 60.00 per boe
from yahoo
"Oh, so they made a net profit of $5million but decided to increase bonuses by $7 million to leave the shareholders with a $2million loss."
Glad I bailed on EXXI.
Schiller was not straight forward with BBE results in my opinion. Thought he misled.
Now he and other managers reach in to the cookie jar and grab more comp due to a rise in stock price?
Let me understand this. Everytime the stock price goes up, management get paid more?
Well at sandridge the ceo gets more if the stock goes down, lol
Exxi closed at 23.11 on Sept 30th , on June 30th it was 15.78 so there was a nice rise in the qtr.
What happens if it goes back to 15.78, do we get the bonus back?
Im disappointed they cant make money with 80 dollar oil.
Bill, 20 yrs ago Don Tyson recieved a paycheck a little more than 1 million. Congress was so outraged that the tax law was changed so as to make salary above 1 million non-deductible.
So, the compensation insultants invented salary appreciation rights, phantom stock, options & a plethora of vile shareholder divestment instruments.
We have voted against every non-cash comp scheme ever since.
Shame no one else does.
here is proxy where you can read about bonus. they have about 5 ways to get them
http://ir.energyxxi.com/secfiling.cfm?filingID=1144204-10-52564
one has a method where there is a multipler based on 53 cents per share pre 5 for 1
Its totally out of line and again the ceo is chairman of the bod so poor corp governance,imho
Although the performance of our stock price is not a specific metric used by the Remuneration Committee to determine annual bonuses, the Remuneration Committee felt the significant deterioration in our stock price during the fiscal year ended June 30, 2009 was such that they could not justify paying the entire bonus at that time. Recognizing that the Company was working on a plan to reduce debt, the Committee approved the payment of 75% of the bonus immediately with the remaining 25% (the “Contingent Payment”) to be paid at the closing of a potential debt reduction transaction.
In order to promote the Company’s goal of reducing its outstanding debt, the Remuneration Committee and the Board of Directors recommended the payment of the Contingent Payment that could be earned in the fiscal year ended June 30, 2010 based upon the Company’s completion of a transaction pursuant to which the Company would reduce the principal amount of outstanding 10% senior notes due 2013 issued by Energy XXI Gulf Coast, Inc. by more than $50 million (such completion date, the “Contingent Payment Date”). For Messrs. Schiller, Weyel, Griffin, Marchive and Reid, the base amounts for determining the Contingent Payments were set at $281,250, $189,875, $99,938, $71,400 and $71,400, respectively. The base amount was multiplied by the quotient of the closing price of the Company’s Common Shares on NASDAQ on the Contingent Payment Date divided by $0.53, the closing price on July 21, 2009, the date on which the Board of Directors authorized the Contingent Payment. Contingent Payments were paid on November 9, 2009 and were $1,125,000 for Mr. Schiller, $759,500 for Mr. Weyel, $399,752 for Mr. Griffin, $285,600 for Mr. Marchive and $285,600 for Mr. Reid. Although the Contingent Payment was earned and paid in fiscal 2010, it was not considered in determining fiscal 2010 bonus awards.
bill — i'm wondering if it is a "marked-to-market" on mngmt stock options… therefore it would go up when stock is up, and v-v. I don't really get how G&A (mngmt comp) could jump that much just due to "stock price appreciation" unless there is a marked-to-market component that is non-cash to shareholders (but shows up in EPS… which is why I don't really use EPS, but look at EBITDA and cash from ops, fwiw).
so in shiller case, 25 % was deferred which was 281 k get the debt down and get a bonus
the debt was paid down, and hocus pocus throw some fairy dust make the calcluation and he gets…1,125,000. WTF, the original def was 281 k how the hell do you get to 1125 m
The company would of better off just to pay the original amount deferred.
You think the other directors will open mouth to shout this down, hell no, they are paid 200 k per year to be yes men
ive lost confidence in these guys
Interesting… in Executive Comp Competition land… Schiller beat his old boss, Jim Flores. In 2009, Flores' total comp was 6.4mm. In FY2010 (ended June 30th), Schiller's total comp was 7.7mm.
Minor footnote, however… over the time period between Jan 1, 2009 and June 30, 2010, PXP was down 18% and EXXI was up 200%….
-Theres the normal bonus
-the derferal bonus
-Profit Sharing Arrangements
Equity Incentives
Time-Based Performance Units.
Performance-Based Performance Units.
The amount due the employee at the vesting date is equal to the grant date unit value of $5.00 plus the appreciation in the stock price over the performance period, multiplied by the number of units that vest. For the fiscal year 2010 grant, the initial stock price used in determining the change in stock price is $7.40 per share
they also get stock options too
there are too many overlapping plans– I guess from their point of view is they took a 2.50 stock and made it 25
Something else I will say for Schiller… he built EXXI from the gound up. Flores stepped into the job as CEO of PXP when it was already a large company. I've seen founders of companies take a lot more in comp, than Schiller. Take a look at almost any company operating in Silicon Valley… just a thought.
FY2010 was a transformational year for EXXI… would like to see the Comp Committee recognize it as such. And not to make this a "typical" year. All you can do is to vote your proxies (and not just throw 'em away).
I dont have a problem with bonus, make them fair and transparent.
do they need 7 different plans?
Should they be able to defer 25 % and when a slam dunk refinancing happens multiply the deferral amount by 5
People lose confidence and the stock goes down and the only ones getting rich are the management
BOP, IMO doesn't matter. He should get rich……after he delivers the goods, not before…ever.
Thats why we only vote for cash comp unless it's the smallest of the small without resources to write the check.
>FY2010 was a transformational year for EXXI… would like to see the Comp Committee recognize it as such.
they should call i that, people would accept it…not all this other bs to get well
the funny thing is, I was known as a bit of a scurge on executive comp… which is something Mutual Fund People are not allowed to actively do (under the investment acts of 1938 and 1940)… it's considered to be "activist"… and you aren't allowed to actively interfere in the management of any company you invest in (as a mutual fund). But didn't stop me from bringing it up in meetings with management, when I thought it was out of line. Can't say it ever did any "good"… but, if you don't say anything, you tacitly condone it, methinks. All you can do is responsibly vote your proxy.
I’m also not a big fan of all these innovative ways of transferring shareholders’ money to CEOs. I find it particularly troubling when the result is to generate a headline grabbing earnings miss for the company.
Heaven forbid these hogs buy stock with their own dough and take the same risk the rest of us do. Of course, then you get a guy like Aubrey who manages to wreck his company’s stock with a margin call. At least the EXXI board hasn’t wasted a ton of money buying a bunch of “collectible” junk from the CEO like CHK did. That was pretty much the highwater mark for shameful corporate governance and put the stock on my permanent do not buy list.
Back from soccer. Looks like the debate on exec comp more than well covered so no need by me.
COG on the tape with 3rd EFS well, more tomorrow.
OII getting a buy initiation the week of earnings, sounds like someone is confident in their EPS numbers, more tomorrow on that too.
Jim Bob, the genius behind the ultra deep Davy Jones took no bonus and 1.8 m salary, his cfo 750 k
Aubrey was skewered as the board felt sorry he got wiped out.
If schiller had half a brain, he would of amortized this thing a little better. Scary thought, maybe he has, and we have more of this coming each qtr
Big Picture Time — I'm not selling my EXXI shares.
Except for the trading shares… may chuck those on a spike to $28.50, at some point before Christmas.
re 149. Me neither. I can live with his pay if he delivers the pay. In the past Schiller has been one heck of an oil and gas finding guy. I'm here for bigger things than quarterly earnings.
Thanks.
#84 CLB…hard to get a good read…if you look at the P&F chart, CLB is currently on a P&F sell signal, but longer term CLB is still trading above long term P&F trendline support…to break this trendline CLB would need to trade below $70 on the current sell signal, which is below the 200 day SMA, not likely, but CLB is currently trying to hold the daily 100 SMA support zone which held nicely back in June, aggressive longs could try here anticipating a hold, but if this breaks, I'm thinking a test of the 200 day at about $72.50 is not out of the question, and even at this price the long term structure still holds up…I've added a 30 min chart for added perspective, near term resistance is at the topside channel trendline, a break of this trendline and an $82 print reverses CLB back into X's, this would be welcome…charts updated
Thank you much for the votes, I appreciate it…
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280
Awesome read JB, thanks very much!