Monday Morning – Welcome to November

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Market Sentiment Watch:  Lots of economic data + midterm elections = a week where the big picture is going to outshine the plethora of energy earnings reports that are due out.   This morning, data out of China last night has equity futures moving higher early.

The Week Ahead:

  • Monday 11/1: Personal income (F=0.1%), consumer spending (F=0.3%), ISM (F= 54%), construction spending (F = -0.5%)
  • Tuesday 11/2: Election day
  • Wednesday 11/3:  EIA Oil Inventory Report, ADP unemployment, ISM services (F = 53.5%), factory orders (F = 1.6%), car sales (F = 12 mm), and the Fed will talk about QE2.
  • Thursday 11/4: EIA Natural Storage Report, jobless claims (F = 443K), productivity.
  • Friday 11/5:  Nonfarm payrolls (F = +70,000), unemployment rate (9.7%), pending home sales, consumer credit. 

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Natural Gas Supply Slide Show
  • Stuff We Care About Today – Earnings Week 3 partial calendar, BHI, AREX, GDP, GST
  • Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $5,200
  • 100% Cash

ZIM (Zman Inefficient Markets portfolio)

  • $4,300
  • 6 positions (HAL $36 Nov calls, NFX $65 Nov Calls, 3 MMR Calls Positions (Nov $17 and $18, Jan $22.50s) and NBL Nov $80 calls)
  • 0% Cash

Commodity  Watch:

Crude oil ended last week essentially flat at $81.43. The 12 month crude strip off a percent at $83.88.  This morning crude is trading 0.72.

Natural gas saw a small bounce late last week on a combination of a slightly smaller than expected (but still giant) storage injection on Thursday and fresh data on supply and demand on Friday. The front month contract closed at $4.04.  The 12 month strip is now trading at $4.31, after a brief trip into the $3s last week.  This morning gas is trading up $0.11.

Tropics Watch: Nothing threatening to the Gulf. 

Natural Gas Supply Slide Show

Only One Word Needed Watch: Ugly.

Stuff We Care About Today

Earnings Calendar

Looking For:

  • BEXP:

    • Strong Production - towards the high end of  and possible exceeding the guidance range.
    • Catalysts - Downspacing results at Rough Rider (2 wells, the Brad Olson 9-16 #2 and #3) and more high IP wells (2 at Ross, up to 5 at Rough Rider),
  • HK:

    • Production - probably comes in near the high end of range despite choking back Haynesville flows.
    • Catalysts - comments on a potential sale of the Fayetteville Shale segment, more Eagle Ford data from oil prone areas at Black Hawk and Red Hawk.
  • FST:

    • Catalysts - At least 3 more Granite Wash wells and comments on timing of their first Eagle Ford test.

Other Notable Names Reporting Later This Week:


Other Stuff

  • BHI - reports nice top and bottom line beats (Revenue of $4.08 B vs $3.8 B expected and EPS of $0.59 vs $0.47 expected) due to strength in the NAM onshore business. BHI is not a name I frequently play in but their conference call is probably worth listening to for additional flavor on coming U.S. slowdown. Call is at 8:30 am EST.
  • GST announces lease litigation settlement. Settled all lease claims for $21 mm... could have been worse had it gone to trial, will reduce costs going forward. 
  • AREX acquires addition Permian leasehold for $21.5 mm.

    • 5,033 net acres
    • Current production of 470 BOEpd
    • Nutshell: With the production the buy is not expensive and takes them to 98,000 net acres in the Permian which is large given their size. I'll have more to say about these guys fairly soon.
  • GDP - Operations Update

    • Selling non-core E. Texas, NW Louisiana shallow rights for $70 mm to a private buyer while retaining rights to drill in the Haynesville and mid Bossier.
    • Angelina River Trend well - big first well here at 21 MMcfepd, 2 more wells on the way, and acquired 5K more acres bring their total to 28,000 net acres.
    • Eagle Ford Shale - first well in Frio county IPs at a respectable 667 BOEpd from a 4,100 foot lateral. 2 more EFS tests down by year end.
    • Buda Lime - also Frio County, well early in flow back now but rates are significant at 512 BOEpd.
    • Nutshell: More positive news that we are used to seeing out of these guys. The name is highly shorted and were it not for weak natural gas prices I would expect to see a squeeze. For now, I only expect a positive reaction.

Odds & Ends

Analyst Watch:

  • HAL - Oppenheimer raises rating to Outperform
  • SLB - Opco cuts to Market Perform
  • DVR - Johnson Rice cuts to Equal Weight
  • OII - Barclays raises target $12 to $70, rating Overweight

92 Responses to “Monday Morning – Welcome to November”

  1. 1
    zman Says:

    XCO Going Private

    $20.50 / share – Oaktree, Boone Pickens, Ares involved.

  2. 2
    zman Says:

    Opening indications are strong for the gassy names on NG rallying back a bit here.

    Also, the idea of more M&A activity before year end could be helping them out. I fully expect to see more medium and small caps get gobbled up in the near term.

  3. 3
    zman Says:

    Ecodata watch
    Income down 0.1%, spending up 0.2%.
    BHI call starting now

  4. 4
    snuhart Says:

    What s your take on the( negative) views expressed in the business insider article ?
     Fellow boarders–AAA provided link on Fri eve, perhaps Sat.

  5. 5
    zman Says:

    On BHI call now, back to you on that article in a bit.

  6. 6
    milepost_43 Says:

    Chavez…..not directly O&G related but his govn takeovers likely to affect production down the road…
    Chavez orders takeover of Venezuelan steel maker

    CARACAS, Venezuela

    Venezuelana President Hugo Chavez has ordered the expropriation of his nation's largest privately owned steel producer. It is the latest in a series of state takeovers that has raised concerns among business leaders.

    Chavez says the expropriation of Siderurgica del Turbio SA is part of his strategy to transform Venezuela into a socialist state. He has ordered the National Guard to safeguard the company's seven plants.

    The company exports steel products to nations in Latin America, Africa, Asia and Europe.

  7. 7
    elijahwc Says:

    TAT Article – http://www.forbes.com/forbes/2010/1108/focus-malone-mitchell-oil-gas-tom-ward-trading-texas-for-istanbul.html

  8. 8
    zman Says:

    I guess MHR was the seller to AREX.

  9. 9
    zman Says:

    BHI – positive tone to call, sounds like they see liquids rich drilling in 2011 offsetting weakness on the gas side.

    Looking for a return to higher margins on the international side, mid teens overall, sees improvement in Latin America next year.

    Also sees opportunity to trim redundant overhead between BHI and the acquired BJ's lines.

    Comments on the Chimera bit and a 90% reduction in drill time well received.

  10. 10
    BirdsofpreyRcool Says:

    GST — settling a lawsuit they told everyone "not to worry about."  About the only good thing I can say about that is at least we know the outcome now.
    Silly me.  I thought "don't worry about it" meant they didn't think it had merit.  Sheesh. 

  11. 11
    milepost_43 Says:

    China…..The strength in the China manufacturing sector was confirmed by a separate survey by HSBC, which showed the PMI rose to 54.8 in October from 52.9.

  12. 12
    bill Says:

    4. I think good points were made. The author says jury is still out but concludes they are uneconomical.
    Sandridge likes to talk about 50 to 100 % irrs yet they lose money qtr after qtr and dont account for fixed cost, interest cost on debt and other charges.
    the industry has been living off old hedges that are now expiring.
    Swn last week reported outspending cashflow. CH has survived by finding jv partners. These guys continue to drill themselves out of existance.
    A prolong period of low prices will shake out the weaker players

  13. 13
    Dman Says:

    SSN -5%   ????

  14. 14
    zman Says:

    BHI call wrapping up, tone positive

    Dman – of late there has been a pre market sell, volume is light but the opening red seems to inspire others to punt. I view these dips as opportunities as we're in a quiet time for them until first real Niobrara news from them in 1Q11.

  15. 15
    zman Says:

    Front and Center Watch:

    BEXP for earnings, first news of how downspacing Rough Rider could look. Positive well results for those 2 wells could drive the next leg up for the name.

    NBL – watching for an exit, calls up 130% is gift horse not to be looked in mouth in my book.

  16. 16
    snuhart Says:

    re 12 thanx Bill

  17. 17
    Dman Says:

    crude up almost 3% ,  WLL just starting to respond. Opportunity there methinks.

  18. 18
    zman Says:

    Snu – I flipped through that piece. Tone is a bit harsh I think and there is a decidedly negative bias on the comments surround core area shrinkage. When you look at how the plays like the Barnett have expanded I'm not sure what they are getting on about. The write downs are mentioned but again, those are non cash writedowns and the way the accounting works, when gas prices rise, you don't get to write up. I'm not going to critique someone else's work point by point but I'll say that I think he makes some fair points but also some weak ones (like the decline rate vs growth issue).

  19. 19
    redjack Says:

    Z…any comments on the offer for XCO?

  20. 20
    bill Says:


  21. 21
    zman Says:

    RJ – Two. 1) This deal has been rumored to have been in the works for a long time. 2) I think we see more M&A activity, not so much on the going private side but on the acquisition side between now and Mar 31. It's gotten so cheap to drill on Wall Street and gas is probably not going to stay this low for more than 6 months, or at least there is some risk that it could be 20 to 25% higher once the shale plays go largely HBP and activity plummets. Like Bill said, the hedges are running out for many and names like SWN have said they will not blow the balance sheet to keep drilling at high speed. They are already largely held by production so you can figure that many names in the Haynesville, that will get their next year, will be saying similar things next year.

  22. 22
    zman Says:

    HK = weird gap up this morning, anyone see a broker comment in front of earnings?

  23. 23
    zman Says:

    or maybe its just the XCO deal. SWN up big too.

  24. 24
    zman Says:

    Eli – thanks for posting the TAT piece, agree with page 2, he needs to find something soon…

  25. 25
    elijahwc Says:

    USEG on tape with another JV.  Is anybody in touch with their molybdenum effort/assets?  Wondering if it amounts to anything or just "timely prose" on their part?
    U.S. Energy Corp. Enters Into Acquisition, Exploration and Development
      RIVERTON, Wyo., Nov. 1, 2010 (GLOBE NEWSWIRE) — U.S. Energy Corp.
    (Nasdaq:USEG) ("USE" or the "Company"), a natural resources exploration and development company with interests in oil and gas, molybdenum, geothermal, and real estate assets, today announced it has entered into an acquisition, exploration and development agreement with private Denver, Colorado-based Cirque Resources LP ("Cirque") to acquire a 40% working interest in an oil and gas prospect located in Kern County, California.

      Under the terms of the agreement, USE has committed to pay approximately $2.5 million to earn a 40% working interest in approximately 6,200 net acres and to carry Cirque for a component of its drilling cost in a commitment well.

    Cirque is the operator of the project and the commitment well is planned to be spud in the fourth quarter of 2010. All subsequent wells will be drilled on a heads up basis. The prospect is a Miocene target in the San Joaquin basin with an expected total drilling depth of approximately 13,000 feet. The commitment well is targeting up to 300 feet of layered Stevens Sands in a stratigraphic trap on the flank of a prolific oil producing field in the basin.

      Based on the results of the commitment well, additional seismic analysis may be applied to further delineate the overall prospect and prospective drilling program. Geologic evaluation and current spacing suggest potential for numerous drilling locations.

      "We are pleased to announce a new joint venture in an area of significant historical regional production with considerable potential," said Keith Larsen, CEO of U.S. Energy Corp. "We continue to expand our partnered initiatives with proven operators in an effort to continue to build a strong oil focused portfolio," he added. "

  26. 26
    zman Says:

    ISM stronger than expected at 56.9

  27. 27
    bill Says:

    25 kern county, oxy is big thers, pxp has some acreage as well
    The molybdenum, is a long term asset that needs 100's m to develop so i dont give it any value. USEG GA rate is high , I like their ep  plays

  28. 28
    bill Says:

    The ng stocks are soaring now that I have rotated into the oily names, lol

  29. 29
    zman Says:

    Bill – LOL, I have to wonder if it has legs or is just an early cycle reflex rally. Those gas supply figures were pretty awful. 

  30. 30
    Popeye Says:

    Z, got rain?

  31. 31
    zman Says:

    Pop- not yet but it is on the way, Eerily quiet.

  32. 32
    elduque Says:

    Why would HK and SWN be up big and GDP flat???

  33. 33
    zman Says:

    GDP 3Q production guidance was soft.

  34. 34
    elduque Says:

    Re production guidance. Correct me if I am wrong, but aren't we seeing those comments from  more than a few of the producers.

  35. 35
    zman Says:

    Eld – I think we are going to start seeing the gassy names pull guidance lower. In GDP's case it was an over promise, under deliver (again) type thing. I don't think it says much about their go forward except that people need to give them a bit more leeway to the downside.  The oil names are not doing this, as a whole. However, there have been some instances among the smaller cap names of delays in completion in plays like the Bakken where competition for frac crews is high. If you miss you date due to a liner issue or some such, you can find yourself pushed back 3 or more weeks for the next completion window. The bigger you are the less trouble you have. This is being sorted.

  36. 36
    VTZ Says:

    Morning Z – I read some analysis the other day saying that analysts are still assuming unrealistically high NG prices for next year and are going to need to bring them down. Do you think that could be another knock against the NG producers?
    If so, do you also think we might be approaching the point of maximum pessimism against the NG weighted names?

  37. 37
    elduque Says:

    Seeing as how it is a quiet day, let me try and get a feel as to what you think is the prime motivator for a gassy stock. GDP came out with as you put it fairly positive news- HK and SWN up, but because production was over promised the stock gets hit.

  38. 38
    BirdsofpreyRcool Says:

    Quiet day… but it's quieter than it should be… z is having network problems.  He's working to get back on-line now.

  39. 39
    bill Says:

    cnbc just had a story on exco. Debt down 5 % on takeover proposal, equity obviously up

  40. 40
    zman Says:

    Thanks for notifying everyone for me BOP.


  41. 41
    BirdsofpreyRcool Says:

    no problem.  quiet day.  HT says it's best to do nothing today… and i believe him.

  42. 42
    zman Says:

    V – yes, as you get multiple compression as a number of knuckleheads out there have $5.75 to $6.25 estimates for NG for 2011 last I checked. I think we are probably a few months from max pain on the NG names. Note NG rolling back over today … they are up on this XCO deal which will fade quickly. I think what gets them into recovery mode is more real M&A and falling production and rising demand.

  43. 43
    zman Says:

    Re 41. Agreed, had some nice pops on the open that have all reversed from MMR to NFX to NBL to WLL, etc, etc, etc. I think there's a oppy here with BEXP but am not playing as I really think this week is not going to be company specific.

  44. 44
    jat Says:

    Hey, remember when XTO happened and everyone and their mother was going to be taken out and that was the point to sell CHK/RRC and everyone else for the rest of this year?
    Slightly different today, obviously, as in Dec 09/Jan 10 you still had people hoping for $7+ gas.  But I think a lot of people chasing today will be left holding the bag. 

  45. 45
    zman Says:

    Jat – yep, it doesn't ever happen all at once. Funny oil up but oily names not. Until you look at equity volumes and see that some people just used the opening pop to take profits on a week that holds a ton of data, elections and QE2.

  46. 46
    RMD Says:

    It is not a slow day for lawyers;  6 have said they are investigating the XCO LBO.  Gee, I'm glad they are the job, but good luck guys.

  47. 47
    BirdsofpreyRcool Says:

    XCO — their latest bond deal (done this Sept) has no "change of control" put option.  That is highly highly unusual for a below-investment-grade-bond issue.  So, this should hardly be a SHOCK to anyone.  (And serves as a reminder that sometimes it's not what is IN the covenant package, it's what is NOT in there, that has the most information content.) 

  48. 48
    BirdsofpreyRcool Says:

    #47 — no.  There is a "change of control" put at 101… my bad.  But it also has to come with a decrease in bond rating.  Interesting.  So, I'll bet mngmt set this up in a way that will keep the ratings at their current B3/B- level. 

  49. 49
    zman Says:

    Thanks BOP. How's the bond market these days, any update on TED?

  50. 50
    BirdsofpreyRcool Says:

    As long as people are looking for yield-vehicles (and who isn't, in a 25 basis point money market world), the bond market is doing just fine.  TED has found his new comfort zone, bouncing between 15 and 18 bps.  If he climbs over 20 bps, I would want to take a closer look.

  51. 51
    Jerome Blank Says:

    EXXI and MMR encountering resistance at the shorter term moving avg's…both acting technically weak at the moment, bumping up and unable to get above resistance, MMR has a bit of relative strength, holding above the 50 day, whereas EXXI is below the 50 day…it's like both stocks are currently out of gas (no pun intended)….
    Don't forget to vote, if it's not too much trouble…I can't stand having no votes at the turn of the month…thanks much in advance…

  52. 52
    elduque Says:


  53. 53
    zman Says:

    Re 50 and 51, thanks much. Will go vote in a minute.

  54. 54
    zman Says:



  55. 55
    RMD Says:


  56. 56
    zman Says:

    Feels like an expiry day, drift on low volume. Earnings tonight should be interesting, especially for BEXP. The downspacing of Rough Rider, should it prove feasible makes each acre that much more valuable.

  57. 57
    BirdsofpreyRcool Says:

    HT saying he can totally understand people selling into strength today… with elections tomorrow and the fed the next two days. 

  58. 58
    bill Says:

    Do you think pxp reports a gain on sale on shallow water deep assets?

  59. 59
    bill Says:

    voted, maybe you can tell me how to read those 0's and x's

  60. 60
    zman Says:

    re 58, yes, but for estimate purposes, that get's back out to get to a clean operations EPS number.

  61. 61
    elduque Says:

    Z – while you were down I sent 37. Would you care to comment.

    Thank you

  62. 62
    zman Says:

    Re 37 – You said it exactly right, looking around you can add gassy names UPL, RRC and others to the SWN and HK. But GDP has did not make their own production target for the quarter. GMXR had same problem a bit back. That's troubling to investors. 

  63. 63
    scoop006 Says:

    ZMAN, Are you privy to Ms. Nickey's current thinking re SPX ? Thanks

  64. 64
    zman Says:

    Scoop – I can go back and look for it last week but not really sure it is the same. I have a note in with her, will let you know when I hear back, thanks.

  65. 65
    elduque Says:

    I guess what I don't understand is "The Company's borrowing base has been redetermined by its bank group. The new borrowing base increased by $50 million to $250 million, with nothing outstanding as of September 30, 2010." That does differentiate them from some of the other cos. doesn't it?

  66. 66
    AAA Says:

    Z, do you have a rough estimate of how GDP growth will affect gas consumption?  Is it feasible to think that a recovery in GDP will turn around gas prices or is the supply so great that only less drilling and production declines can do the trick?

  67. 67
    zman Says:

    Eld – to some extent relative to the gassy names. That's completely common over in the Bakken players though. I think they've temporarily worn out there misses with investors. Fool me once shame on you, fool me five times….

    AAA – There is no hard and fast rule to it. Believe me I've tried. Chemicals is the most important thing we could see to improve demand after good weather. This winter is supposed to be mild so that's a negative, demand appears to be improving in the industrial, that's good but it doesn't offset mild weather, the transportation issue is not happening any time soon so that's no help, which gets you back to weather and the replacement of some coal generation with gas but with production this high, it's just tough to eat away at storage.

  68. 68
    wcoaster Says:

    RAME is up on a $43 M asset sale.  Looks positive, although I'm sorry to see some of their Barnett Shale going. 

  69. 69
    zman Says:

    NOG doing a 4% down move … most likely just noise. The whole day looks like noise.

  70. 70
    BirdsofpreyRcool Says:

    Pretty much a useless day.  Random Walk with downward bias…

  71. 71
    RMD Says:

    At a quick glance, valuation of RAME's sale is rel. close to AREX's purchase valuation.

  72. 72
    Pati Says:

    JB, I vote every day.  Want you to get into the STARS!

  73. 73
    choices Says:

    thanks, JB-voted

  74. 74
    elijahwc Says:

    Drumroll please……EXXI new cvt pfd symbol to be EXIXF. 

  75. 75
    zman Says:

    RMD – still mulling the AREX, highly intrigued, thought they got a good deal on the land this morning.

  76. 76
    zman Says:

    Re 72, how many does that take?

  77. 77
    zman Says:

    FST and APC coming across the tape now, comments late. Hopefully BEXP and HK will announce tonight as well, easier to do a thorough job.

  78. 78
    zman Says:

    REXX crossing the tape as well, will get to that one too.

  79. 79
    elijahwc Says:

    RMD: Z and Rodman both say AREX got the better end of the deal……rats!
    Rodman says: MHR/Permian Sale Makes Sense

    "Cinco Terry sale fits its strategy. MHR has sold its 10% non-operated
    working interest in the Cinco Terry field for cash proceeds of $21.5
    million. The asset had proved reserves of 2.4 MMBoe (63% liquids) and
    production of ~470 Boe/d. This equates to ~20% of its mid-year
    reserves and 25%-30% of Q3 estimated production. The sales price of
    ~$9/Boe and ~$46,000/Boepd is below the average of recent Permian
    deals. Strategically, we think the deal makes sense for MHR as this is
    a legacy property from its PRC days and it is focusing on operated,
    unconventional plays going forward. While Cinco Terry currently makes
    up a material component of reserves and production, we had forecast
    this to decline as MHR grows its resource plays in the Eagle Ford and
    Marcellus shales. Proceeds from the sale should help fund the
    company's spending gap as it develops these plays.

    Lowering production forecast. We are adjusting our production forecast
    to remove volumes from the sale of Cinco Terry, which closed last
    Friday. Our 2010 production forecast slides ~5% to 1,660 Boe/d on the
    divestiture. This causes our 2010 CFPS estimate to drop a penny to
    $0.06. For 2011, we are trimming our production forecast by 10%-15% to
    ~3,200 Boe/d. Our CFPS estimate for 2011 nudges down to $0.25 (from

    Target price slides to $5.75; maintain Market Outperform. Our target
    price drops ~$0.25/share on the asset sale, as we had valued the
    interest in our NAV higher than the sales price. However, the bigger
    picture is MHR's continued transformation from non-operator into an
    operator of unconventional resource plays. We remain buyers of MHR and
    think it makes sense to have a position in the stock ahead of its
    upcoming catalysts in the Eagle Ford and Marcellus. We arrive at our
    target price by applying a 1x multiple to our NAV of the company's
    proved and risked upside reserves, valued at long-term commodity
    prices of $80/Bbl and $6.00/Mcf.

  80. 80
    zman Says:

    BEXP on tape, 3Q oil volumes well above guidance, 4Q guidance range has the low above the point estimate they had for oil, more later.

  81. 81
    snuhart Says:

    —  re 12 and 18  : illustrates the value of this board to traders who are not energy buffs but rather momentum technical people (as am I )  just looking for ideas and trains to jump on.
    I've had  good experience the past five months or so. The profitable ideas were born here, I made my own losses ( late entries)  but my hat is off to you.

  82. 82
    zman Says:

    Snu – thanks much. Any suggestions you or anyone else has for improvements are always welcome. Send them to zmanadmin@gmail.com

  83. 83
    RMD Says:

    79 MHR sale:  usually small non -op bits go for a discount as the majority partner is the obvious , economic buyer.  Does anyone have a feel for what the non-op discount averages (a fairly esoteric statistic, I know).

  84. 84
    zman Says:

    RMD – I have seen several of late, discounts vary widely, helps to limit if there is production obviously. But all of them are steep.

  85. 85
    zman Says:

    BEXP marked off large. Operations update not yet out. Headlines show a miss but that's with non-cash charges. Beat otherwise and boosted guidance. Bugaboo will likely be the lifted (again) spending plan. They have a lot of cash on the balance sheet and nothing on the revolver, tomorrow could be an opportunity if an EPS miss drives it lower. This is why the ZCAT remains in cash.

  86. 86
    snuhart Says:

    Scottrade af hrs shows 19.43b 19.59 ask
    by-line"BEXP shows operating loss due to hedges",  that s paraphrased , doesn t seem accurate

  87. 87
    bill Says:

    Oil moved up in q3, so anyone that has oil hedges are going to have a mark to market non cash loss
    Sd with its 2.b oil in hedges will lose 75 to 100 m. People need to be ready for the shocking headlines

  88. 88
    zman Says:

    BEXP on the tape with big Bakken completions, deets in the morning.

  89. 89
    zman Says:

    HK out with very strong quarter, officially punting the Fayetteville, next years guidance is very strong as well at 30 to 40% growth, details in post.

  90. 90
    irongate Says:

    JPM chimes in  on BEXP qtr
    Brigham Exploration Company (BEXP) – Strong ops update, increased capex along with
    production boost, raising ests/PT – BEXP released 3Q10 results and a brief operations update.
    Operating results were positive with the best publicly announced Rough Rider-area well and two
    other high-rate Bakken completions. The market might interpret the increase in 2010 capex as a
    negative, but the ops update and increased production guidance likely offset most, if not all, of it.
    EPS and CFPS ahead of consensus and our estimate. Recurring EPS/CFPS were $0.16/$0.28
    versus consensus of $0.10/$0.25 and our estimate of $0.10/$0.22. Production in line with
    guidance but above our estimate. BEXP’s production of 50.6 MMcfepd was within guidance of
    47.0-51.0 MMcfepd but higher than our estimate of 48.8 MMcfepd. Increased crude oil production
    mitigated the decline in natural gas production. Increased production and capex guidance. BEXP
    increased 4Q10 production guidance from 9.5-10.5 Mboepd to 10.2-10.8 Mboepd and increased
    2010 total capex from $404.0mm to $466.1mm. $40.3mm of the $62.1mm increase in the capex
    budget comes from BEXP drilling additional net wells: 7 Williston Basin, 2 Vickburg, and 2.8
    Wolfberry. The rest consists of additional seismic and leasehold. Increasing NAV and establishing
    higher 2011 price target. We are establishing a Dec 2011 price target of $18.50 (above our Dec
    2010 target of $18.00) based on our updated NAV. BRY is trading at 115% of NAV, higher than
    the group average of 83%.

  91. 91
    zman Says:

    Thanks Irongate, post will be up in a few.

  92. 92
    elijahwc Says:

    THX IG

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