Wednesday Oil Preview + More Earnings

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Market Sentiment Watch: Out of gas. Technicals are driving a push towards 1,200 on the S&P but there is strong sense of malaise hanging over trading as we approach 3Q GDP on Friday, the elections next week and the Fed's probably push for more easing in a flight from deflation move. 

Ecodata Watch:

  • Durable goods came in at 3.3% vs 2.5% expected.
  • We get new home sales at 10 am EST, forecast is 300,000. 

Conference Call Watch: (all times EST)

  • PXD - 10 am - Will listen
  • WLT - 10 am - Will listen to replay
  • OII - 11 am - Will listen 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today –WHX, Earnings Watch: PXD, WLT, OII, SSN
  5. Odds & Ends

Holdings Watch

ZCAT (Zman Catalyst portfolio):

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

ZIM (Zman Inefficient Markets portfolio)

  • $3,000
  • 5% Cash
  • Positions: 3 MMR calls positions (Nov $17, $18, and Jan 22.50), HAL $36 calls, NFX $65 calls
  • Yesterday’s Trades:
    • NONE

ZLT (Zman Long Term portfolio)

  • Sold 2,500 WHX for $23.10, up 20% to my average cost, before considering the distributions. My model shows a slight miss for their 3Q distribution relative to Street estimates. The name has run of late and I will buy it back if the three analysts who follow it beat it down again like they have in past quarters. See chart showing a $23 to $16 drop following the last distribution. My current forward yield expectation is 9.7% but I think analysts are overestimating 3Q production levels. If it doesn't miss, I've had a good run with it and can rebuy depending on the price. If it does miss (the press release for the announcement should be out late in the first week of November) I think it is likely we see a pullback.  
  • I'll have a revised ZLT list out later today. 


Commodity Watch: 

Crude oil ended up 3 pennies to close at $82.55 yesterday, in uneventful trading. After the close, the API released a bearish / odd looking report (see comment below on potential weakness inspired by today's inventory report). My continuing sense is that crude is "safer" in the mid $70s and that product demand data and economic data in the OEDC do not support a significant move higher for crude. This morning crude is trading $0.80.

Natural gas crept up 4 cents to close the day at $3.35 yesterday. This morning gas is trading off 1 penny.

  • Tropics Watch: Richard disintegrated, nothing on the horizon at present. 

Early Read On Natural Gas Storage: This has been a 

Street is at 73 BCF for tomorrow’s report.

  • Last Week: 93 Bcf Injection
  • Last Year: 24 Bcf Injection
  • 5 Year Average: 32 Bcf Injection
  • 10 year Hi: 69 Bcf Injection
  • 10 year Low: 9 Bcf Withdrawal

Oil Inventory Preview 

 API Watch: Odd numbers. One slightly bullish point would the continued linkage between Cushing according to API and Cushing according to EIA of late. Otherwise, an ugly set that should send crude on a quest for an $80 test should EIA reflect the the big build in crude and any build in distillates. 

  • Crude: UP 6.432 mm barrels
    • Cushing down 351,000 barrels
  • Gasoline: DOWN 1.805 mm barrels
  • Distillates: UP 0.818 mm barrels

Stuff We Care About Today

WHX - Revised Model ... Street is looking for more here as per comments above.   Ive made some tweaks to the model since the last iteration, especially in the area of natural gas prices (think lower in 4Q and 1Q11) and I've slightly bumped up 3Q production volumes from my original and probably overly conservative modeling of a return to trend from 1Q levels following a timing related increase in 2Q volumes. A portion of the 2Q effect here is season (trucking oil to market in the winter can be difficult and there have been freezeups as well). The model also now better reflects sales relative to pricing (there is a 1 quarter lag). All of this had the effect of bringing my 3Q number from the $0.58 up $0.63. The Street is still up at $0.71 and I will rebuy the name should they beat the shares of this inactively managed vehicle down over a quarter that simply was out of reach. 

PXD Reports OK Financial Quarter, Good Results Tunisia, Strong Growth To Come U.S.

The 3Q Numbers:

  • Production of 114.6 MBOEpd, on the mid of prior guidance of 113 to 116 MBOEpd
  • Revenue of $616.6mm vs $501 mm expected (bloated by realized hedge gains and would have been light to the Street without them)
  • EPS of $0.34 (ex items) vs $0.38 expected
  • EBITDA of $300.7 mm vs $308 mm expected


  • Good well results in Tunisia, company expected 8 to 9,000 BOEpd net by early 2011, nearly tripling current production in the region. To date the play has not gotten a lot of credit from analysts. 
  • Spraberry play at 25 rigs now (amazing for a company that was at a standstill 18 months ago) going to 30 by year end and 40 next year. 
  • Eagle Ford at 7 rigs, and this will likely grow, as results have been very strong with IPs averaging north of 2,000 BOEpd recently. 
  • Lower Wolfcamp horizontal tests to be at TD by year end. 
  • 4Q10 Guidance: 115 to 120 MBOEpd
  • Long range Guidance - reiterating 15+% now through 2013. 

Nutshell: Numbers post miss on costs but operational update is largely better than expected. I'm not in the name at present but watching  

Conference Call: Today, 10 am EST. 

WLT Reports A Slightly Light Quarter, Given The Recent Run I'd Expect A Pullback Which I May Use To Buy Back In. 


The 3Q Numbers:

  • Revenue of $464 mm vs $484 mm expected
  • Sale volumes were 1.9 mm tons, flat with year ago levels as volumes were sold out of inventory in both periods
  • Production was 1.8 mm tons in 3Q10 vs 1.5 mm tons a year ago. Higher due to a mine expansion. 
  • Operating margins were a very solid $108 per ton in 3Q
  • Natural gas production was 3.5 Bcfe in the quarter vs 1.5 Bcfe a year ago. Higher production was largely due to an acquisition. 
  • EPS of $2.57 vs $2.59 expected vs $0.45 a year ago


  • Pricing for their high quality met coal (premium harding coking coal) drove the quarter
  • Guidance: guidance for 4Q volumes straddles 3Q levels at 1.7 to 2.0 mm tons. Operating margins may give the Street pause as they retreat to a range of $0.84 to $0.87 per ton which is probably not a function of management being overly conservative in this instance but more likely a function of lower average pricing. 
  • Guidance for 2011 remains unchanged at 8.5 to 9.0 mm tons. 

Nutshell: I'll circle back and listen to the replay here. I like the name but am not in at the moment having sold my tester sized position a few weeks back. This is a very momentum trading name and I prefer to buy into on days when all looks doom and gloomish for the sector. Despite the recent run, the name remains cheap trading at 10.5x 2010 EPS and 8.4x 2011 EPS. 

Conference Call: Today, 10 am EST

OII Reported Strong 3Q Numbers, Guided To A Stronger, Potential Record 2011.  

The 3Q Numbers:

  • Revenue of $5.16 vs $468 mm expected
  • EPS of $1.09 vs $0.94 expected


  • Guidance:

    • 2010 -

      • Raised...Again. New range is $3.57 to $3.62 vs a prior $3.20 to $3.40.
      • The Street is currently at $3.39 ... 
    • 2011
      • Initiated at $3.45 to $3.75;
      • The Street is currently at $3.57
      • They typically straddle the Street when they come out of the gate for a new year's guidance, either that or they come out with a number that is light of the Street. Confidence must be high. 
  • Quarter's strength came from a combination of stronger than expected subsea products and subseas projects (all that TV time at Macondo working for BP)
  • Big umbilical order will drive higher YoY backlog at year end
  • No debt, increasing pile of cash, $300 mm in borrowing capacity and capital spending that stays easily within cash flow.

Nutshell: Blowout results, still a pristine balance sheet, ROV's still in high demand and still adding more to meet contracts. Importantly, not only did they beat but they raised the guidance this year by more than the beat. These are not over promising types and they started the year with a very conservative tone. Strong oil prices and continued high international offshore drilling rates are likely to propel them to record earnings years this year and next. 

Conference Call: Today, 11 am EST. 

SSN Reports 3Q Results, Updates Activity

  • The report highlights the Goshen transaction and talks about future developments on the retained Niobrara prospective acreage (17,000 net acres) and addresses adding more Bakken acreage as they are well into developing their six section toehold in the Williston.
  • North Stockyard Production (Williston Basin, primarily Bakken formation production)

    • was 488 BOEpd in the quarter, the Gary well came on late in the quarter and as such volumes should track higher in 4Q as the well is performing "better than expected" without quantification. 
    • The Rodney is expected to frac next month
    • The Earl well is now set for January, this is the second time this completion has been put back a month.
    • Harstad #2 well (downspacing pilot well) will spud in 1Q11.
  • Hawksprings Project (Goshen County, WY, Niobrara):
    • 3D acquisition to commence on Nov 1, on time with previous comments
    • Now talking 1, not 2 wells to drill in 1Q11
  • Other Stuff:
    • Lea County, NM - Bone Spring well to be competed in 1Q11. 
    • Diamondback Prospect (Jefferson County, TX), Gulf Coast, set to spud in November.
  • Nutshell: Nothing to write home about, not even close to approaching cash flow driven status (probably another 2 years for that to happen) and there is some slippage as noted above in some of the comments above. Also note that they have Permian potential (Bone Spring) that they'll be testing along with another Gulf Coast prospect early next year and for which I have given them very little value in the current NAV model. I continue to hold the shares in the ZLT. 

Other Stuff

  • CLB since earnings: still watching the pull back, starting to look a bit overdone. 
  • Reporting the rest of this week: click here. LINE should be on the table for Thursday but was omitted. 
  • NBL should have interesting things to say about the Niobrara play that may prove helpful to names from SM to EOG to tiny SSN. 

Odds & Ends 

Analyst Watch:

  • KOG - Cut to Hold at Stifel on valuation.
  • and on KOG - Morgan Keegan cuts to Market Perform
  • PXD - Outperform reiterated at FBR

188 Responses to “Wednesday Oil Preview + More Earnings”

  1. 1
    snuhart Says:

    As of 8:41 EST  AOL finance shows last OII $57.75

  2. 2
    zman Says:

    Front and Center Watch:

    KOG down 4% on a pair of downgrades, valuation I'm sure on both, may do a trading shares add if it gets out of hand. Earnings around the corner should have a big # on the top line, and more commentary as per the Cat List.

    OII – Over $58 now, watching for an initial pull back after the open, great quarter and guidance

    PXD – EFS comments should help HK today

    WLT for a potential pullback due comments listed in the post (operating margins)

  3. 3
    zman Says:

    OII shooting to $60 per market, just about everything else should be weak with the market at the open.

  4. 4
    BirdsofpreyRcool Says:

    Debt Markets — any CFO of a cash-flow-generating-organization worthy of the title should be adding (or at least giving heavy thought) to their debt here.  Not sure it gets any better than this.  And strategic use of debt enhances common equity holders… either through direct leverage (can own bigger or more assets) or through shareholder-friendly moves (issue debt, buyback shares).  The Demand is there.
    Poster Child = Goldman Sachs went to the market to issue $250mm of 50-year notes (yes… FIFTY years!).  Instead of what they wanted, they came away with $1.3 BILLION of 50-yr notes placed and priced at 6.125%.  People want yield… and they are willing to pay up and term out, to get it. 
    This is a precursor to higher highs in equities in the following years.

  5. 5
    zman Says:

    re 4 – best yield idea I have at present remains LINE on the MLP/equity side. Second one is the WHX on a sharp pullback in the next 2 weeks.

  6. 6
    zman Says:

    Too little too late watch:

    ConocoPhillips also curtailed about 180 million cubic feet equivalent a day of natural-gas production in North America in response to low natural-gas prices.

  7. 7
    zman Says:

    OII – completely broken out, JB, when you get a chance would like your thoughts, not willing to chase pre call, 12% seems a bit too much.

  8. 8
    zman Says:

    FTI probably getting a little bit of a pull from the OII comments on business environment in the deep and on the umbilicals strength.

    EXXI/ MMR largely shrugging off early weakness today and EXXI's 1 time cost issues yesterday don't seem to be yielding much in the way of negative analyst commentary today. Expecting further news on Blackbeard East in November and initial news on Davy Jones around then through end of year as well. Lafitte will likely be at TD by end of year so we could have three ultra-deep Shelf sources of news by New Year's Day.

  9. 9
    BirdsofpreyRcool Says:

    JB — KOG trading shares… you were thinking 4.10, is that right?

  10. 10
    zman Says:

    Anyone having slow site issues?

  11. 11
    ram Says:


  12. 12
    scoop006 Says:

    refresh very slow

  13. 13
    ram Says:

    Very slow.

  14. 14
    zman Says:

    Analyst Watch:

    OAS – RBC initiates at Perform. Seems like the analyst crowd is out of steam for the Bakkens at the moment. Granted they have had a good run, but the production growth for a basket of names is leading to rapid multiple contraction on a CFPS basis. Sentiment could be getting a bit constrained on the simpler metric of $/acre in some cases but I really don’t see a change in sentiment from “we like oil” to “we like dry gas” in the near future. Doesn’t mean I don’t see opportunities to scoop up some cheap natural gas names as the shoulder season and then a mild winter due their worst to the gassier names, especially the unhedged, but it does mean that I think the core positions in energy traders portfolios will remain oil, then liquids rich centric.

    New home sales in 10 minutes,
    PXD call in 10 minutes.
    Oil inventories in 40 minutes.

  15. 15
    zman Says:

    OK, thinking I know where the problem lies, will disable something.

  16. 16
    zman Says:

    How about now?

  17. 17
    zman Says:

    OII eying pre Macondo levels, again, I’ll likely play on a pullback but don’t want to chase pre oil #s and pre OII CC.

  18. 18
    BirdsofpreyRcool Says:

    it’s faster now

  19. 19
    zman Says:

    West – saw your Niobrara/ SM comments last night, thanks. I think NBL could reinvigorate the names involved there. In addition to SM, SSN, EOG, I should have mentioned PETD and REXX as potential movers on positive NBL results.

    BOP – MMR trading rather zealously of a sudden, don’t see a broker note.

    Getting on the PXD call now.

  20. 20
    scoop006 Says:


  21. 21
    BirdsofpreyRcool Says:

    MMR = like kicking back at the drive-in movie. Lots of news in the pipeline over the next 2 months. Just grab your popcorn and enjoy the show.

  22. 22
    zman Says:

    New homes sales at 307,000 vs 300K expected, S&P ticked down on that, guessing market gives in line numbers a shoulder shrug until claims tomorrow and GDP and Friday.

    PXD call about to start:

    Thanks for the site speed comments, had a link to a lagging tools site, broke it.

  23. 23
    BirdsofpreyRcool Says:

    ATPG — the catalyst i most want to hear out of them is having 2 permits in hand, so they can begin planning the next two MC wells, to be drilled in 1Q11. That would be a good time for the shorts to finally leave the party and find another target.

  24. 24
    zman Says:

    PXD Notes:

    Spraberry/Eagle Ford outperforming

    No problem with 15+% per year, now through 2013.

    One of the Tunisian wells did 6,000 boepd, Street won’t be able to ignore this segment much longer. Nice job to the guys involved with that project.

    Operating CF to double by 2013

    Noting that some analysts are saying they are doing knockout swaps. Those guys are wrong, no knockout swaps and no sold calls on oil to allow for higher dry gas drilling, both comments were made in broker notes this morning.

  25. 25
    BirdsofpreyRcool Says:

    Music to watch MMR by…

  26. 26
    zman Says:

    PXD Notes 2

    2 horizontal Wolfcamp

    1 will be TD’d tomorrow, completed in December so maybe a pre Christmas vacation pr there.

    Look for upgrade to the type curve for the Spraberry wells soon (Dec/Jan), see slide 10 here:
    Which shows a clear outperformance pf recently drilled wells.

  27. 27
    zman Says:

    On the PXD call at the moment, but we have a couple of new subs today. Welcome! Feel free to ask questions, there are no dumb ones, I will get to them following the CC if they are detailed or earlier if not.

    Oil #s in 10 minutes.

  28. 28
    zman Says:

    Re 25 = LOL.

  29. 29
    BirdsofpreyRcool Says:

    EXXI — gots my paw out for some tasty $22-fiddy shares… waiting… waiting…

  30. 30
    zman Says:

    PXD Notes:

    Eagle Ford Shale

    7 rigs running and now have 8 wells waiting on completion, they are building 2 new frac fleets (1 here and one for the Sprayberry) and are also getting another dedicated frac crew here in 1Q11. They recently signed a midstream deal here so we should see a bump by mid 2011 in EFS volumes.

    Drilling results: good consistency.
    Still on target for a 5,000 BOEpd exit rate.
    2011: 10 to 13 MBOEpd
    2012: 19 to 24 MBOEpd
    2013: 32 to 41 MBOEpd

  31. 31
    zman Says:

    S&P cracking lower … voter fraud?

  32. 32
    bill Says:


    TNP pre announced a loss and a share offering stock down 15 %

  33. 33
    BirdsofpreyRcool Says:

    z — call me “old fashioned”… but this voter fraud stuff is really getting under my skin. We seem to get more Banana Republic every day…

  34. 34
    zman Says:

    Re 32. How not to sell your deal watch: A loss and an offering? Come on guys, help yourselves a little. Bill, keep watching the area for us if you would, at some point we should get point to pick some tanker shares up cheap. Have you heard much about the magnitude of the move to convert VLCCs to drybulks?

  35. 35
    BirdsofpreyRcool Says:

    Bloomberg headlines blame the fall on question regarding QE2 next week.

  36. 36
    zman Says:

    BOP – nothing wrong with being old fashioned.

    PXD weakening with market. Good, I’ve been away here and wanted to be long but shied away from a pre quarter buy back in due to a lot of broker hype and price target upgrades going into the quarter. Numbers were so-so on the bottom line, not troubling at all. Production costs were up due to a combination of higher than normal workover costs and some one time items that depressed 1Q and 2Q costs. Strip that stuff out of all 3 quarters and you have a decent, stable level of LOE expense. PXD is smaller than EOG and NBL but it is in my list of larger, oily, non Bakken names that will be in demand for year end holdings and for 2011 and longer.

    Q&A starting

  37. 37
    zman Says:

    EIA Oil Inventories

    Crude: UP 5.0 mm barrels
    Gasoline DOWN 4.4 mm barrels
    Distillates: DOWN 1.6 mm barrels

    Good on products, headline on crude is a big outlier but largely imports driven.


  38. 38
    zman Says:

    More EIA

    Cushing was down 300K barrels, in line with the API, positive as we pull away from record highs

    Gasoline: Big uptick here driving that Gasoline inventory drop. Demand was 9,358 mbopd last week, up from 8,9 mbopd in the prior week.

    Distillates: Above the 4.0 mm bpd mark, also positive.

    Crude off $1.27 to 81.28 but these are actually better than expected numbers.

  39. 39
    BirdsofpreyRcool Says:

    EXXI 22-fiddy shares…

  40. 40
    zman Says:

    Re 35, in other words we’re marking time in front of GDP, the elections, etc as there is little new thinking on QE2, QE3 … that I have read in the last 24 hours. Other than the Fed is “terrified” of deflation and continued expectation of gridlock will put the onus of “fixing the economy” on fed actions and people have less and less confidence that that’s going to do anything but push weakness further down the road and lead to a long period of high unemployment and 1 to 2% GDP growth.

  41. 41
    zman Says:

    PXD Q&A tone is positive .

  42. 42
    bill Says:

    >Have you heard much about the magnitude of the move to convert VLCCs to drybulks?

    Not really..issue is lower demand and too many new ships ordered

    Makes me think oil is overpriced here at 80

  43. 43
    VTZ Says:

    RE 35, 40: Any talk about reducing or managing QE better than the bazooka approach is just that — talk.

    The Fed has no option other than massive amounts of QE for the foreseeable future. I’d also like to remind everyone that you all said I was crazy when the Fed was talking about the end of QE in mid-2009 and I called their BS.

    That being said, the S&P is rangebound by the dollar. Without another move down, the S&P will be capped by the recent highs given the lack of any exceptional strength anywhere, especially the all-important job market.

  44. 44
    BirdsofpreyRcool Says:

    VTZ — let me be the first to say “You are NOT crazy.” You have been very very spot-on, on so many of your observations and recommendations.

  45. 45
    zman Says:

    re 42. Yeah, way too many ships, was just thinking that China said they will be buying ships and converting for coal and that that could be a minor positive on that front.

    VTZ – I hear ya, I recall saying that similar talk about raising rates in 2010 was crazy.

    PXD Q&A

    Tunisia wells are 100% oil, makes things easier.

  46. 46
    zman Says:

    Tom – Gil Yang asked a good question of the PXD guys.

    Asking about how you keep gas wells flat in the mid-continent without drilling.

    PXD’s answer. By paying attention to detail. Capital for the division is less than $10 mm per year. That’s strong. Glad to see them keep the rigs off of the acreage and just doing field work, given where prices are. They think they can keep declines to mid single digits. One thing to recall is that some of this is Raton (CBM) volumes where we are in the tail of much of the production the old EVG wells. Long reserve life, very flat, just keeping it all running, “manufacturing” gas.

    Spraberry – People are starting to pay $15 to $20,000 per acre. (Probably Aubrey).

  47. 47
    zman Says:

    OII call in 5 minutes, it just refuses to rollover.

  48. 48
    zman Says:

    I’ve asked Nicky to come on site re the S&P drop here.

  49. 49
    elijahwc Says:

    HES fom briefing. TRGLs ptnr in the Paris Basin

    HES Hess: Conf call summary (62.49 -0.02) -Update-

    Current net production from the Bakken is approximately 18,000 barrels of oil equivalent per day with nine rigs working. Co plans to add one additional rig in Nov and expect to exit this year with net production of about 20,000 barrels of oil equivalent per day. Says acquisition of American Oil & Gas is progressing through the regulatory process and is expected to close by the end of the yr.

    On Q&A, co says they are building and have been building the position in the Eagle Ford. Says they have about 75,000 net acres under a contract and their plans are to begin drilling in Nov in the Eagle Ford. If they can get additional acreage, they will expand that position further. Regarding broader unconventionals, co says they are really focused domestically in the US in their Bakken position and the Eagle Ford and they have their position in the Marcellus. They continue to look for other opportunities but are also focusing internationally. Hoping to get back to work in the Gulf of Mexico in the middle of 2011, but that’s just a planning assumption at this point as lots of questions remain about what lies ahead.

  50. 50
    zman Says:

    OII call starting now:


    Stock still up $7.50.

  51. 51
    zman Says:

    If anyone gets the KOG notes today, please forward to zman@zmansenergybrain.com

  52. 52
    zman Says:

    Interesting AREX remains somewhat bulletproof and at the highs as the market comes off.

    OII notes so far most of the comments are from the press release.

  53. 53
    RMD Says:

    PXD jumbled answer on their best Wolfcamp acreage being their southern acreage and their view of the quality of the acreage south of them. I’ll be checking as this is potentially imp’t to AREX.

  54. 54
    tomdavis12 Says:

    Z: Did you see the news on CXPO? Selling shares at $5.00. Stock should be higher?

  55. 55
    jiveyjr Says:

    this dip let me get all the ATPG I wanted…that is until it starts going up…then I’ll want more…

    still trying to take more SSN…a dumper gave me a nice chunk at 1.16 earlier and I want a few more shares…

  56. 56
    zman Says:

    CXPO on the tape selling stock in a private transaction at $5 per share with the stock at $2.89. The buyer, American Energy Capital Corporation, will take 4.25 mm shares for $21 mm. They have an option acquire another 1.75 mm new pref shares that would convert into 1.75 mm common shares at 12/31/10. At this point, AECC would have 13.4% of CXPO.

    For future reference, this is how you dilute me. By selling the stock at nearly twice the current share price in a private placement.

    Look for 3 E. Texas well completions in the remainder of this month.

    Look or their first 2 Eagle Ford tests to be completed by year end

    Current production levels of 45 mm/d bode well for analysts estimates for 3Q and 4Q volumes

    Recall that I didn’t like these guys up at $5 several months ago and I waited out the decline until taking my first position in the name. I continue to hold CXPO in the ZLT.

    There were a lot of notes on this post in comments on CXPO if you are interested:

    Um, that’s interesting, the

  57. 57
    zman Says:

    Tom – yeah, just saw it before I read your 54, thinking I take more, lot of potentially catalytic events, now to year end and they should have a good looking quarter in terms of volume growth in front of them. We have EFS well on the way there, we also have South Texas wells that should make for strong reserve adds this year and they have 12,000 acres in the Niobrara (10K are HBP) so you could see them look to monetize that or drill a well. Capex there is going to be fully funded by CFOps and this deal.

  58. 58
    zman Says:


    OAS – Sold a second tranche of OAS for 20.72, up 24% to my average cost.

    Swapped into:

    CXPO – Adding a second piece of CXPO at an average cost of just over $2.90 (the original buy in was $2.89). See comments in today’s post for details.

  59. 59
    tomdavis12 Says:

    Z: I can’t remember a company selling additional shares at an 80% premium. Am I crazy? PS give my best to Gil Y when you see him. 🙂

  60. 60
    zman Says:

    re 59. Yeah, that’s what we call a rare deal. Anyone know the buyer there? They must have liked the positioning in the EFS, the Gulf Coast or something. I don’t get paying anywhere near that premium otherwise. They’re extremely cheap on CF (just over 2x) but pricey on TEV to EBITDA due to the debt. Maybe the sense is they get another $30 to $40 mm for their Niobrara in a sale.

  61. 61
    tomdavis12 Says:

    60 Backs up to China. (Shanghai)

  62. 62
    BirdsofpreyRcool Says:

    The buyer is a private Chinese investment firm. I haven’t heard of them… but think we will be seeing more and more of this. Why should the Chinese just buy UST’s with US dollars? If I was them, I’d stop supporting the Public Sector in the US and start buying up the Private Sector. That is exactly what this is…. and exactly what they should be doing at this point. Smart fellows. Taking advantage of “Time Arbitrage.”

  63. 63
    BirdsofpreyRcool Says:

    OK… ‘fess up. Who snached my EXXI antelope at 22-fiddy-ONE? Cheeky monkey!

  64. 64
    zman Says:

    Tom – yeah, I see that now, thank you, was wondering what else in energy they have done. We’ve been talking about China making investments via JV’s, this is a premium insured to be too for anyone to turn down although no shareholder vote is needed on this one.

  65. 65
    BirdsofpreyRcool Says:

    z — jumped in with ya on CXPO. Shot first… now I have to go back and aim. Looks like a balance sheet with lots o’ bank debt. But if this equity injection saves ’em, then you just materially lengthened the call option embedded in CXPO stock. That stuff has a way of scooting up, quickly.

  66. 66
    BirdsofpreyRcool Says:

    let the Scooting Begin!

  67. 67
    BirdsofpreyRcool Says:

    I don’t think it’s a coincidence that MMR is scooting too. Chinese Money is deep-pocketed and the very definition of Patient. Time Arbitrage to the nth degree.

  68. 68
    BirdsofpreyRcool Says:

    CXPO — this also puts another pillar of support under ATPG…

  69. 69
    VTZ Says:

    Chinese money is concerned with a 5+ year time horizon not the quarterly, weekly, daily, and minute-by-minute spasm attacks we see here.

  70. 70
    zman Says:

    BOP – I hear ya, I had some notes on the back in mid Feb that basically said, thanks but no thanks, I’ll wait for it to fall sub $3.

    But there are some interesting points in there and this was pre Niobrara thinking. Note that they are now likely to break the 4Q numbers listed below.

    Crimson Exploration Issued Production Guidance, Reserves, Operations Update – Out mid day yesterday.

    * Just a few quick comments to add to the file on these guys; I plan on staying away until the name is more fairly valued, someplace below $3, probably closer to $2.50. Current price is $3.58.
    * 4Q production of 34,800 Mcfepd
    * 2009 came in at 40,900 Mcfepd vs 52,600 Mcfedp in 2008; the drop primarily coming from reduced drilling activity
    * 2010 guidance of 35 to 39,000 Mcfepd; not exactly exciting as the low end implies flat levels with the 2009 exit rate.
    * 1Q10 guidance of 30 to 32,000 Mcfepd.
    * Reserves fell 19% from 2008 results to arrive at 97.5 Bcfe. Given the current total enterprise value of $288 mm, the market is still valuing CXPO’s reserves at an all too lofty $2.95 / Mcfe, up from the $2.40 / Mcfe their 2008 reserve report would have yielded.
    * 2010 Capex of $50 to $56 mm vs estimated EBITDA of $87 mm
    o This gets you:
    + 7 Haynesville wells
    + 1 Eagle Ford well
    + 4 Yegua/Cook Mountain wells in southeast Texas
    * Operations Update:
    o Haynesville: Their much touted Kardell well in San Augustine county Texas, the so called highest rate Haynesville well with an IP of 30.7 Mcfepd has been on sales for 90s with an average rate approaching 11 MMcfepd. This is a small working interest well in an area of the Haynesville where others are seeing high rates as well and where CXPO has 12,000 net acres.
    o Eagle Ford Update: Vertical well drilled … encouraging. Planning a horizontal well for the second half of 2010. This is a little later than I think people would like.

  71. 71
    zman Says:

    70 – that comment is from my mid Feb piece on them.

  72. 72
    BirdsofpreyRcool Says:

    CXPO deal just hit Briefing… getting more attn now

  73. 73
    zman Says:

    CXPO up 16%, I was surprised it sat there up a dime as long as it did. They’re by no means out of the woods but you have to figure the Chinese did a colonoscopy on them.

  74. 74
    VTZ Says:

    I’d say a little more… lol.

  75. 75
    zman Says:

    OII call ongoing in the background as I mess with CXPO, very positive call and the stock is backing off a bit as it drags on a bit longer than necessary. I will not play there today.

  76. 76
    BirdsofpreyRcool Says:

    ha! Shot first, aimed 2nd… thought CXPO had more offshore exposure. My bad. Bought in at 2.90 all the way up to 3.16. Going back to do the legwork now. Ignore my ATPG and MMR comments with respect to CXPO… i was mistaken.

  77. 77
    zman Says:

    OII call over. Positive, but we may see some understandable profit taking there. Looking at the daily chart, they are still far from the pre-Macondo share prices seen this past Spring and business is now stronger than they or the investment community was thinking. Stepping out for a bite, back in 30 min.

  78. 78
    zman Says:

    BOP – Its on the single digit slice and dice list to be out soonish. I’ll have some basic comments on them in the post tomorrow. Recall these are the guys that shouted long and hard about their record (at the time) well in the Haynesville with DVN, came in over 30 MM/d, dropped like a stone, even for that play as it was basically open choke. They had a minor interest in the well and a lot of debt and people ran for the hills from the name.

  79. 79
    BirdsofpreyRcool Says:

    z — they have a LOT of debt. But it’s bank debt. Slightly different animal than bondholders. Can still take away the keys to your car, but it’s a different process.

    Also, rule-of-thumb = bankers rarely lend over 50% of “liquidation value” on E&P assets. Clearly, they don’t always get that right… but just pointing that out.

  80. 80
    tomdavis12 Says:

    Z: Bagged some CXPO also but you beat me with your price. Nice Shagging.

  81. 81
    BirdsofpreyRcool Says:

    TomDavis — you aren’t British, are you… 😉

  82. 82
    tomdavis12 Says:

    Bloody no

  83. 83
    BirdsofpreyRcool Says:

    CXPO — capital structure gets more interesting… Oaktree is their largest shareholder at just under 40% (pre latest private placement). Oaktree is also the 2nd lien lender, with $150mm of secured notes, due May 2012. This muddies things up a bit, if CXPO gets into “financial distress.” Right now, Oaktree-the-equity-holder owns 30-something percent of the equity, which has more upside than debt… but if equity screws up, then Oaktree-the-lender can step in and take over 100% of the assets. hmmmmm… ‘course, ACEC knows this… but just something to keep in mind.

  84. 84
    BirdsofpreyRcool Says:

    Aside — i sure as bloody hell (as TomDavis would say) would rather have Oaktree doing this, than GE (rip-your-lungs-out) Capital.

  85. 85
    tomdavis12 Says:

    BOP: Great color as always. I’m glad you are on our team.

  86. 86
    BirdsofpreyRcool Says:

    would think — on the back of this ACEC financing — that CXPO migrates back toward the Giant Sucking Magnet sitting at $5. May take a coupla weeks, but that should be the trajectory.

  87. 87
    cargocult Says:

    I hop that wasn’t bop who made CXPO surge with 400k+ shares traded.

  88. 88
    BirdsofpreyRcool Says:

    cargo — i did my part, for sure. 🙂

  89. 89
    zman Says:

    BOP – I’d be out before $5 unless drilling results are overtly positive. EBITDAX / Interest of only 2x is tight, production this quarter should be impressive but $5 puts them into pretty lofty air on a TEV/EBITDA basis with such a gassy production profile (72% of prod is NG) and current low gas prices. This was my second buy and my average cost is still $2.90 … not planning on falling in love as I don’t know management and don’t see how they pay down debt in the near term. Of course, I can think of some other names with more debt that we happily own including EXXI (on a debt to cap basis), so that’s not always going keep me out and would in fact encourage me to buy if I saw a near term bump in natural gas prices (in CXPO’s case).

  90. 90
    BirdsofpreyRcool Says:

    z — that EBITDAX/interest ratio is tight, tight, tight. This financing gives CXPO some breathing room and plants a giant Flag in the Center of the TownSquare that Someone thinks CXPO is worth more than $5/share. Doesn’t mean we get there… certainly doesn’t mean we get there soon… but we should migrate in that direction.

    Not sure I want to stick around long enough to get to know management… only one i’ve seen before is the landman, Tracy Price, from Newfield (yrs ago). So, no feeling for “how good” these guys are. On the other hand, i do know the boys and girls at Oaktree… very patient, very smart…

  91. 91
    zman Says:

    re 87. Cargo, that’s an unfortunate, I guess, effect of the ZLBAST list. My trades fired off at 11:32 EST. As soon as they went, I drop the comment on the site and the next thing is the blast list to the Active Client list. At 11:34 the minute chart, the volume zoomed and then stayed fairly strong for the next 50 minutes. Not my intention but I’ve notice with the SDM crowd it seems to happen.

  92. 92
    zman Says:

    Yeah, and I’ve met Tom Adkins from NFX, now at CXPO, smart but only met him at their Analyst Days so not a lot of exposure other than the plays he was in the Gulf.

  93. 93
    zman Says:

    BOP – of course, I’m happy to let it run as we approach catalytic elements.

    If you are new around here, there is quite a bit of useful information on tabs at upper left an in links at upper right on the site.

    Here’s the latest Cat List:

    And I note that CXPO isn’t on there which is an oversight on my part.
    (should add to the list 1 or 2 EFS completions, and 3 E. Texas mid Bossier)

  94. 94
    elduque Says:

    For a different perspective on quantitative easing


  95. 95
    elduque Says:

    VTZ- Do you have any thoughts on why SU is trading relatively cheap and PWE expensive?

    Other than the 240 ducks that flew into one of their waste ponds. I wonder how many ducks are flying over northern Alberta in a day?

  96. 96
    tomdavis12 Says:

    CXPO _ Johnson Rice put out a piece about reit overweight because events coming in near future. As was stated by Z earlier.

  97. 97
    zman Says:

    Thanks Tom, have you seen Barclays yet? Last I saw they were long and at the time wrong with a $7 target.

  98. 98
    zman Says:

    BOP – just sent me that Barclays was out reit on CXPO yesterday with a $7 target, thanks BOP.

    LINE closing on new highs as they approach earnings tonight.

    West – Nice call on XEC, I completely missed that they reported today, anything interesting?

    MMR holding up well on a red day … hmmm.

    OII – no pullback for me today, not playing for now.

  99. 99
    zman Says:

    KOG – doing a good job of shrugging off two downgrades that were obviously meant to generate commissions for their sales forces.

  100. 100
    zman Says:

    WLT – turned around during their conference call, going to listen to replay soon.

  101. 101
    zman Says:

    VTZ – can we get an update on gold thinking when you get a chance, maybe with some levels to think about adding at?

  102. 102
    zman Says:

    WHX – slipper slide may had started today, would like to think I top ticked the exit for no other reason than I have a small ego that needs constant feeding. Honestly, would love to see a small miss here, followed by a three way analyst thrashing (I think David Tameron is one of them and he surely turned the model over to an intern) following the “miss”. Would love to see it down around $16 again, giving it a forward yield of 14% or so.

  103. 103
    BirdsofpreyRcool Says:

    MMR — hearing stock running on rumors of a good logging run at Blueberry Hill (a well EXXI is not in). Unconfirmed, but makes sense. Lots of different pieces of news will dribble out about MMR over the next few months. Grab the popcorn!

  104. 104
    zman Says:

    Re 103, thanks, it’s nice to have a BOP that works. 😉

  105. 105
    VTZ Says:

    PWE has always been one of the premier trust names and I’ve found that it has always traded at a premium.

    As well, PWE and SU are very different in terms of asset mix and I think that part of the reason why SU may appear cheap is all of their recent asset sales.

    I have perenially thought that SU has been undervalued on an NPV basis but that’s more of a beef that I have with how in ground assets are perceived (the ones in the existing mines, not expansions).

  106. 106
    jat Says:

    Don’t forget that Barclays helped bring CXPO to market, makes some more sense of the $7 target

  107. 107
    tomdavis12 Says:

    97 Don’t have access to Barclay’s

  108. 108
    VTZ Says:

    Also, the duck issue was Syncrude, although Shell and Suncor both announced duck deaths as well. Shell announced only 4 though and I’m not sure if Suncor disclosed the amount.

    I’m told that there was a huge amount of ducks flying by and some landed because of the freezing rain that night, but it is however unfortunate.

  109. 109
    VTZ Says:

    I’ll comment on gold later in the day but I feel as though this is healthy consolidation with support at 1320 resistance at 1339, more major resistance at 1350 and round number support at 1300. The past few days gold has been battling to stay above and in between a couple of the longer term uptrend lines.

    I believe that it will likely consolidate and I don’t foresee any drops even with the jawboning from the Fed.

    In the intermediate term (ie < 6 months) I believe we will see 1500-1600 without any major pullbacks until then. I would however re-evaluate depending on the Fed announcement/verbage which is undoubtedly what everyone is waiting for.

    I still believe that the equities offer the best value and they are still trading attractively relatively to the price of the metal. I use the HUI or GDX to Gold ratio to compare the performance and I also compare the GDXJ to the GDX amongst other metrics.

    I believe that at some point, there will be a significant leg up in the equities considering the continued short interest in some of the junior names. At some point they will get buried.

  110. 110
    VTZ Says:

    For initiating a position I might wait until just prior the QE announcement to see how it is trading. I won’t be making any trades until just prior the meeting regardless of how it is trading.

  111. 111
    VTZ Says:

    The lowest I think gold can go is ~1269.

  112. 112
    VTZ Says:

    Last one… ~1269 represents both intermediate uptrend support as well as former resistance/support.

  113. 113
    zman Says:

    Thanks much V, that’s what I was looking for.

    Good point Jat.

  114. 114
    elduque Says:

    Thanks VTZ.

  115. 115
    zman Says:

    yahoo.com down. weird.

  116. 116
    RobBanks Says:

    BOP – mindless speculation on my part, but since MMR dropped $3 on the bogus water issue, doesn’t it make sense that it should be clawing its way back after that issued was addressed on the EXXI call?

  117. 117
    BirdsofpreyRcool Says:

    RobBanks — sure. MMR has many lots of different reasons it could scoot from here. And that is certainly a good one.

    Don’tcha just LOVE inefficient markets? It gives us a chance to buy stocks we want at prices we are happy to pay. MMR with a 15-handle was positively Christmas-in-October.

  118. 118
    BirdsofpreyRcool Says:

    “many lot of different”…heh heh heh… oops. but you get my point.

  119. 119
    BirdsofpreyRcool Says:

    RobBanks — by the way… was it you, who snatched those $22.51 EXXI shares? So far, no one has ‘fessed up to stepping in and grabbing my lunch.

  120. 120
    RobBanks Says:

    The 15 handle was great. Used it to add yesterday to my slightly underwater (pun intended) position.

  121. 121
    tomdavis12 Says:

    BOP: Do you know what involvement TB Pickens has to the dynamic duo MMR/EXXI?

  122. 122
    BirdsofpreyRcool Says:

    Nice snag! The biggest risk to MMR stock… is the risk of NOT being in it. JMHO, of course.

  123. 123
    ram Says:

    BOP – Is CIGX selling on rumors/news?

  124. 124
    BirdsofpreyRcool Says:

    tomdavis — reef can answer that much bettern I can… but, Boone owns the stock of both, unless I am mis-informed.

    Being part of MMR’s Ultra-Deep Shelf Play is sorta like belonging to the Old Geologists Club. One way or the other, guys (or gals) with a nose for exploration (“Oil Finders,” we call ’em), want to get a seat at this show. Kinda fun to know that TBP has to sit in the cheap seats, like the rest of us ordinary slobs. (As opposed to having a front row seat, like Mr. Moncreif.)

    Then you have Jim Flores… who gave up his Front Row Seat in order to drop back and hang out with our crowd. Still scratching my head over that one…

    Meanwhile, pass the popcorn, please.

  125. 125
    BirdsofpreyRcool Says:

    ram — CIGX is being buffeted about by rumors and innuendos. I continue to sleep happily at night, knowing that someday I will be able to afford a MUCH better wine collection, when that ship sails into port. It’s a multi-year project, but we should start to see the (positive) affects soon, methinks.

    CIGX will have to do another round of capital-raising. But I’m sure it will be done quietly and with the current shareholder base… so, shouldn’t be a stock crusher. And it’s already been factored into my mental model for the ultimate sharecount. So, not concerned, fwiw.

  126. 126
    BirdsofpreyRcool Says:

    EXXI — ok. Now i’m REALLY irritated at missing those 22-fiddy shares!!

  127. 127
    zman Says:

    MMR $17s are alive and kicking, $18s are waking up.

  128. 128
    ram Says:

    Wow BOP, you have a wine collection. I wish there was a Trader Joe’s around these parts so I can get a case of two buck Chuck for a months supply. Now if CIGX gets moving…., I might gravitate towards Sutter Home.

  129. 129
    BirdsofpreyRcool Says:

    ram — Yes. I have a wine collection. However, the inventory turnover rate is roughly 1.5 weeks. Looking to stock a few more bottles when CIGX/EXXI and friends do what they are supposed to do.

  130. 130
    zman Says:

    This thing is just east and north of S. America, Bastardi saying it could be big one if it avoids land early on.


  131. 131
    BirdsofpreyRcool Says:

    … and i just LUV Trader Joe’s!! 🙂

  132. 132
    zman Says:

    WLL, LINE tomorrow

    rest of week:

  133. 133
    ram Says:

    BOP, when CIGX gets to $5, I will gladly add to your wine cellar!

  134. 134
    zman Says:

    KWK – lawsuits being filed over the recent Darden family news.

  135. 135
    BirdsofpreyRcool Says:

    aaaahhhh, ram… ya don’t have to do that.

    Besides, I might not live that long… you may SHOOT ME first, given the extraordinary volatility in CIGX and friends. But, hang in there!

  136. 136
    bill Says:

    nutjobs appoint nut jobs


  137. 137
    jim bob is my jesus Says:

    EXII: today announced it has commenced, subject to market conditions, concurrent underwritten public offerings of 9.5 million shares of its common stock and $200 million (800,000 shares) of convertible perpetual preferred stock. The company also intends to grant the underwriters a 30-day option to purchase up to 1.425 million additional shares of its common stock and 120,000 additional shares of its preferred stock to cover over-allotments, if any.

  138. 138
    john11 Says:

    EXXI offering news

  139. 139
    BirdsofpreyRcool Says:

    ahhh, man! Schiller said he wouldn’t do a stock offering until he had a property he wanted to buy. He just announced a 2ndry… as well as more of those nasty perpetual converts. This just chapps my butt.

  140. 140
    john11 Says:

    Energy XXI intends to use the net proceeds from these offerings to purchase approximately $119 million aggregate principal amount of its 16% Second Lien Junior Secured Notes due 2014 and to repay approximately $91.5 million of revolving credit facility debt. The remainder of the net proceeds will be used to for general corporate purposes, including the repayment of debt, to fund capital expenditures and acquisitions.

  141. 141
    elijahwc Says:

    For all the movie fans here I ran across this elsewhere today.

    “Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That’s the other guy’s problem. Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness. Super Bowl, World Series – they don’t know what pressure is. In this building, it’s either kill or be killed. You make no friends in the pits and you take no prisoners. One minute you’re up half a million in soybeans and the next, boom, your kids don’t go to college and they’ve repossessed your Bentley. Are you with me?”

    Louis Winthorpe III

  142. 142
    ram Says:

    BOP, you now have your 22.50.

  143. 143
    elijahwc Says:

    Yipp Yipp Yipp it’s a registered cvt pfd. Son of EEXXF. We get a do-over. In short, if it pressures the stock and goes discount or even if it stays within 4 to 5 points premium, then buy it until your head explodes.

  144. 144
    zman Says:

    Betting we have the reason for MMR up today. Schiller probably going to take some of the WI% that MMR just took off of PXP.

  145. 145
    BirdsofpreyRcool Says:

    EXXI — aaargh.

    File Under — “Don’t Get Mad, Get Even”… i’m going to buy the sh*t outta those converts. Then Schiller is gonna have to pay out the butt to get them back… like he just did with he 7.25%s.

    This rather defines “insanity,” doesn’t it. LEARN from your MISTAKES, man! sheesh.

  146. 146
    bill Says:

    exxi- now you know why the insiders sold shares at 25

    I wonder if they will give themselves 10 m in bonuses for having a share offering

  147. 147
    BirdsofpreyRcool Says:

    EXXI — gotta say, tho… if ya can’t stand the heat, get outta the kitchen.

    Schiller is a gun-slinger with his balance sheet. But he knows how to coax value out of the shallow shelf. However, I think he should fire his CFO for giving THE WORST ADVICE IN THE WORLD.

  148. 148
    bill Says:

    wll numbers are out

  149. 149
    zman Says:

    Bill – see that, headed out to soccer, will have comments late and in the post tomorrow.

  150. 150
    ram Says:

    ZMAN, did WLL beat numbers?

  151. 151
    BirdsofpreyRcool Says:

    bill — yep. Don’t think that the $25 sale slipped my mind. Stewing over that one too. Thing is, however, that was set up a while back, under the 10-b (or whatever it is) stock-selling plan. Schiller has more to go at a pre-set $30 too.

    We knew he was going to issue equity and debt (and he can’t issue debt until he extricates at least a good chunk of those 16% 2nd liens)… but it shoulda been part of a bigger strategy move… like they did when they bought the Mitsui stake. Damn. And those 16%s aren’t even callable yet. So, will have to pay up for them too. He told us he was coming after those notes on the conf call… but thought he would show more finesse.

    Yeah… no two ways about it… not pleased with this at all.

  152. 152
    snuhart Says:

    EXXI I , m seeing 21.90 after hrs

  153. 153
    elijahwc Says:

    Whoa EXXI bid 21.50 afterhours. Repeat for emphasis, you will want to own those converts. Either on new issue, if it breaks par upon trading or up 5 points. Cvt bookrunners UBS 888-827-7275, BNP Paribas 212-471-6667 and RBS 203-897-4677. The fact that EXXI is trading heavy gives you a “margin of safety”. Futhermore be sure to note that the cvt arb’s will be long the cvt and short the common which is another way of saying that they will be allocated most of the issue and you want to be with them.

  154. 154
    BirdsofpreyRcool Says:

    snuhart — me too.

  155. 155
    BirdsofpreyRcool Says:

    elijah — keep us informed on how to play those converts. Thank you.

  156. 156
    bill Says:

    whats the new conversion rate

  157. 157
    elijahwc Says:

    BOP – Schiller must have had a need for speed on this one.

  158. 158
    zman Says:

    WLL – looks mid guidance on the Q, slightly light on EPS and CFPS to Street. Nothing new at Lewis and Clark to report so we get more wells there between now and year end. I own it in the ZLT but not in the options portfolios, may add on weakness tomorrow during the call. Deets in the Thursday post.

  159. 159
    bill Says:

    wll beat on sales and missed by 3 cents on adjusted earnings, close enough for govt work.

    They lowered their cost structure

    60 per boe for rev and 22 per boe for cost yields 38 per boe

    Ga is a modest 2.80 per boe

    Looks good from where i sit, also issued new guidance..I havent compared it to old guidance

  160. 160
    zman Says:

    JB – can I get a read on CXPO when you get a chance? Thanks. OK, am out of here for a bit.

  161. 161
    zman Says:

    Thanks Bill, I’ll have it all in the post tomorrow, have not read through all yet, just wanted to get back to Ram.

  162. 162
    elijahwc Says:

    BOP – I’m normally never a new issue buyer but I may be this time (probally for half a position) assuming one can even get in on the deal.

    There will big demand from the heggies. And maybe from one particular yield hog, Leon Cooperman. Bet he’s got a size allocation.

  163. 163
    BirdsofpreyRcool Says:

    elijah — i have no doubt Schiller has some properties he wants to add to the exploitation portfolio. There is a very attractive Exxon package that is floating around. Might even want to up his share of the Ultra-Deep. Guess he has to strike while the iron is hot.

    People didn’t like the Mitsui acqtn and share issuance either. But it didn’t take long to blow past the offering price. I’m just disappointed that 1) there is no acreage package already wrapped up (so we know what the dilution is), 2) that they are repeating the MISTAKE of issuing perpet converts, and 3) this follows pretty closely on the heels of a very heavy G&A quarter (exec pay) and Schiller’s planned share sale.

    #3 doesn’t bother me all that much… but #s 1 and 2 really do.

  164. 164
    elijahwc Says:

    BOP #163 = maybe all the bad stuff is being made up by the price decline.

    Bill – Will inquire tommorow on price talk and terms. Conversion ratio probally something lung ripping like up 40% if they can get away with it.

  165. 165
    bill Says:

    wll guidance for 2010 same for volume, lower expenses

  166. 166
    BirdsofpreyRcool Says:

    elijah — bet the conversion rate is relatively low… in order to keep the coupon low. The 7.25% issue was an insanely high coupon.

  167. 167
    BirdsofpreyRcool Says:

    Bottom line = not gonna sell my EXXI shares into this refi mess. And will try to get more than my fair share of the converts, when elijah advises the time is right. However, it doesn’t mean i’m not effin’ steamed about it right now.

  168. 168
    bill Says:


    exxi separation package ousted exec


  169. 169
    BirdsofpreyRcool Says:

    gee, bill — have any more salt to pour into the gaping head wound? Go ahead… i can stand the pain. Been knocked silly by Schiller’s Stupid Pet Tricks. ha!

  170. 170
    BirdsofpreyRcool Says:

    On a (much) more pleasant topic… EEP just beat. (Or at least, didn’t choke.) Declared another $1.0275/unit distribution.

    Always look on the Bright Side of Life!

  171. 171
    bill Says:

    lol, Your wounds will heal that’s just a little boo boo.

    I wouldn’t bet against you!

    Actually, the separation package ( one time expense ) goes a long way into explaining alot of the ga hit. It just made me look into the proxy and saw some of the bs compensation crap going on, some, but not all of it justified for 4 times move in the common.

  172. 172
    BirdsofpreyRcool Says:

    bill — glad you take the ribbing as it is offered… in good nature. And i really really appreciate the due diligence you bring to the financial statements and footnotes. You definitely run circles around me there… glad to be on your team. Thanks!

  173. 173
    Dman Says:

    BOP – as someone who still doesn’t know what a convert is (other than vaguely), I should mention that Cramer used to frequently rant about how managements often didn’t understand that they were being suckered into convert deals that were bad for the stock. Dunno if that is the case here, but you reminded me of it the “learn from you mistakes” comment. Cramer said that he could never get these managements to understand why it was bad for them.

    BTW – if anyone wants to do a primer on converts, I might not be the only sub with no clue on these.

    BTW2 – for new subs, re Z’s comment #27: *I’m* the one that usually asks the dumb questions around here. If someone else asks dumber questions than me, my nose will be quite out of joint. But don’t let that stop you.

  174. 174
    BirdsofpreyRcool Says:

    Dman — simply stated, in today’s world, converts (especially of the preferred stock flavor) are just RAW MEAT for Hedge Funds and PIGGY BANKS for Bankers.

    Note to managements … when you see your banker break into a WIDE GRIN on your agreement to go with his “convert idea,” it should be a NEON FLASHING CLUE that you are about to lose a pound of flesh.

    What is just over-the-top irritating about THESE converts is that Schiller just had to PAY UP to get out of his LAST converts… Also, wasn’t he watching his stock price, after the last offering??? It was the long convert holders, shorting the sh*t out of the common stock. Talk about “insult to injury,” man… do you have NO COMPASSION for your equity holders? Can you not learn from history???

    rant over.

    Elijah is a world-renouned convert expert. Perhpas he might be will to teach a short Master Class on the subject.

  175. 175
    elijahwc Says:

    Dman #173 – glad you ask that.

    My son borrowed my only copy so I’m ordering a new one. This is the single best understandable lay text ever ever ever on converts. Written twenty years ago by the man who built the record and owned the standard at Valueline, Allan Lyons. One hell of a deal @ $1.82 on Amazon.

    Enhanced Convertibles by Allan S. Lyons


  176. 176
    Dman Says:

    Thanks Eli.

    BOP – yeah that was exactly what Cramer used to say. Except he said it with bulging eyes and lots of shouting and screaming.

  177. 177
    skimo Says:

    Is Schiller’s wife the Schiller of NPR fame? Maybe he’s getting his Dale Carnegie lessons on making friends and influencing people from her?

  178. 178
    RMD Says:

    from Briefing:Brigham Exploration (BEXP) CEO sold 125,000 shares at $20.00-20.70 on 10/7

  179. 179
    irongate Says:

    I gotta tell ya BOP.. be careful with CIGX. I am new to this board so i dont want to make any enemies…. but CIGX is the old STSI.. I have met Mgt and they are pretty slick. Lost a bundle on STSI with their Low TSNA tobacco lawsuit against RAI … Twice!!. now suddenly they are an Alzheimer drug co?

    They say they have a “compound” in preliminary tests that reduces beta-amlyoid in cell cultures? There are 1000’s of compounds that do that. The holy grail is finding one that works in living animals w/o massive side effects.

    and there is no proof that beta-amyloid is the “cause” of Alzheimers… it may very well be an “effect” of Alz, and NOT a cause as demonstrated by a number of drug failures.

    James Altucher seems to love this stock.. even says this compound is a neutraceutal… which means crap like echinacea that doesnt do anything.

    CIGX will continue to dilute shareholders with stock offering after stock offering tethered to some pipe dream. CIGX is for mad money only imo.

    That said.. this is a great site… lotta smart people here as I am learning.

  180. 180
    BirdsofpreyRcool Says:

    irongate — I hear you. And thank you for your contribution! Always additive to hear pros and cons. I have been in and around the STSI/CIGX stock and story since 2004… so, I know wherefrom you speak (and felt the financial pain myself, selling STSI 2x, right after the 2 Garbis rulings [in 2007 and 2009]).

    Your points are all valid. There will be another dilutive offering… and soon, i would think. That has been factored into my thinking on this stock (always figured there would be about 130mm share on an FD basis, before they go CF positive). And it is for “mad money” only, as the risk reward is 0 or or several hundred percent from here. It won’t happen overnight (the several hundred percent), but i think there is a greater than 50% chance it will. The Roskamp Institute is a solid, outside validation of the potential here. Note I say “potential.” But, that’s for Alzheimers. What we know now, is that CigRX does help people satisfy the desire to smoke. If that is the only use of the compound, that is still a huge market.

    So, let’s look at this the way I am… 20% chance of success and 80% chance of complete and total failure. Success means compound works for smokers and company gets a small percentage of a very large “quit smoking” market. Stock goes to $20. On the other hand, management is a complete sham and stock goes to zero. Expected value in this scenario is $4.00.

    It’s great that you feel free to comment on this site. Z does a bang-up job of keeping us on the straight and narrow. I only brought up CIGX on a slow Friday when z was on vacation last summer. It was my Evil Plan to keep him from ever going on another vacation (and i think it worked). Other than that, it’s All Energy, All the Time on this site. Thanks again and welcome!

  181. 181
    zman Says:

    Exactly why I won’t be going on vacation for quite some time, lol. Welcome aboard Irongate!

  182. 182
    Jerome Blank Says:

    RE: #7 Oll, really was not all that technically remarkable yesterday, but what a difference a day makes, actually the P&F chart looked really good right before the gap, having recently broken longer term trendline resistance, but the daily was not that exciting…posted new charts…the obvious issue being how Oll reacts to the massive gap…the weekly chart is interesting, a huge triangle, also interesting that the runup stopped right at the weekly resistance line…also added a 30 min which will be a helpful perspective in
    terms of the gap…

    #9 KOG, had a great breakout to $4.55 and then pulled back into the range, the 30 min has gotten a bit sloppy, I’d like to see KOG stay above $4.30 tomorrow, holding the redefined intraday trendline…you can see it on the updated 30 min chart, if $4.30 holds great, if it breaks and stays below $4.30, I’m thinking KOG could test $4.10-$4.14 support zone, this would be the long try, which would tail below the lower daily bull channel line, anticipating a close above or very near $4.20 which would keep KOG within the channel…

    RE: #160 CXPO, still on a P&F sell signal but in X’s, nice break out above the basing triangle, stopping and closing right on the 200 day SMA resistance line, a pullback to support at $3 would be a place to consider conservative longs, weekly resistance at $3.50…charts updated


  183. 183
    zman Says:

    JB – thanks much, very helpful, voted.

  184. 184
    ram Says:

    Thanks ZMAN. Thanks Bill.

  185. 185
    zman Says:

    Ram – Its a small miss, other good stuff in there though as they have decided to downspace their core Sanish area, adds a lot of potential reserves.

  186. 186
    ram Says:

    Thanks. I took options late today on WLL. I was hoping not to get a repeat of the beating on WLT today. I took WLT vs. OII – ouch.

  187. 187
    West Says:

    For those with an interest here is address for Sundance's most recent update… http://www.asx.com.au/asxpdf/20101028/pdf/31tg75zrtsd9l2.pdf   ….

  188. 188
    elijahwc Says:

    Welcome Irongate! 

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