18
Nov

Thursday – Oil Review Plus Natural Gas Preview Plus Parade of Midgets

Print Friendly, PDF & Email

Market Sentiment Watch:  Markets turn optimistic on a potential bailout for Ireland as EU and IMF officials meet today. GM's IPO came near the high end of the upwardly revised range and at least for now appears to be a partial excuse for a bounce this morning. In energyland, oil is getting a lift from equity futures and a weaker dollar. Coal names may get a boost from WLT's proposal for Canadian coal miner WTN. In today's post I've included a quick look at three of the single digit midgets and will add a few more in coming days. 

Ecodata Watch:

 

  • Jobless claims of 439,000 vs expectations of 435,000
  • We get Philly Fed (F = 5.0) and Leading Indicators (F = 0.6%) at 10 am EST

 Housekeeping Watch: Please bookmark the backup site:

www.zmanbackup.wordpress.com

In today's post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Stuff  We Care About Today – Single Digit Midget slice and dice (BSIC, CXPO, GMXR), WLT
  5. Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $5,000
  • 99% Cash
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $5,300
  • 1% Cash
  • Yesterday’s Trades: None

Commodity Watch

Crude oil fell $1.90 to close at $80.44 yesterday after the EIA reported a mixed bag of inventory data that failed to rally crude due to lower product demand (see below). This morning crude is trading up $1.50.

  • MEND Watch: Nigeria frees 19 hostages from rebel hands and takes control of rebel camps. Things appear to be heating back up in the Delta but so far, no attacks on pipelines or platforms have resulted in lost production. That may change if the government and the Movement for the Emancipation of the Nigerian Delta decide to go back to full scale hostilities. 

Natural gas rallied $0.21 to close at $4.03. We remain range bound and this blip comes on weather is unlike to be the beginning of a sustainable rally. This morning gas is trading off slightly. 

  • Tropics Watch:  Zip, nada, nothing brewing. 

Natural Gas Preview:

I'm at 5 to 10 Bcf for today's storage number.

    • Last Week: 19 Bcf Injection
    • Last Year: 21 Bcf Injection
    • 5 Year Average: 2 Bcf Injection
    • 10 year Hi: 33 Bcf Injection
    • 10 year Low: 90 Bcf Withdrawal

The Street is at 8 Bcf 

Oil Inventory Review:


ZComment: While the headline numbers were sizable and bullish on the surface, demand for gasoline ebbed slightly and distillates reversed course from prior weeks making me think some of the demand we have been seeing is dealer stocking in the northeast. Look for product inventory numbers to halt their declines next week as utilization bounced with the end of the Fall refinery maintenance season. 

Stuff  We Care About Today

 

Single Digit Midget Slice and Dice - a few names of interest ... Quick thoughts on these vastly dissimilar but each-interesting-in-their-own-tiny-little-way names.  In other words, why I care in bullet form. Detailed discussions can be found on the Reports tab of the site for many but not all of these. The bullets and forms below are fairly tailored to what I think is a relevant snapshot of each. Please note that the $ per flowing BOE metric is oft quoted and one I seldom use but was asked to include. Some analysts like to put a number of $100,000 per flowing barrel on the production so I threw that in ... on the gassier names you can see that this produces an oddball and meaningless result. On the oilier names it appears to hold more water.  

BSIC - Earthstone Energy

  • They are the tiniest name in my coverage list with a TEV of a mere $18.2 mm.
  • They are also one of the few names that in this group that is profitable (reported 2 cents in June quarter and 4 cents in the September quarter).
  • I don't have a model built here but extrapolating the first six months of the fiscal year puts them at 6x this year's cash flow which is not at all expensive for a highly speculative name.
  • Net debt to cap is not applicable as their cash hoard of $4.8 mm exceeds their debt. Speaking of debt, their interest cost is roughly $8,000 per quarter ... a non concern. 
  • They have a $20 mm line with a borrowing base currently at $4 mm and it is undrawn. 
  • My original look at them can be seen here
  • Nutshell: I own a smallish position, partially because it trades by appointment and partially because its such a minnow and there is not a lot of detail in the public realm to give one a good idea of their plan going forward. On price to reserves they are fairly valued. There is the risk they just sit around and do nothing but BEXP and Zenergy are drilling wells in which they will have some small working interests with news possible on the Brigham wells to year end (BEXP just picked up their partner in this acreage) so their is the possibility of headline reward here.  I've included a number of metrics below and before anyone asks, no, I don't see them at the $1.59 price shown at the bottom of the page but they could get there if they apply themselves. The Bakken players, because they are in rapid growth mode are trading at signicantly higher multiples of $ per flowing barrel.  I'm still getting to know these guys and I suspect they will try the dreaded reverse split to get listed. Normally I'd just run but I'm curious since their balance sheet is clean.  


 

CXPO - Crimson Exploration

  • Interesting story of production turning the corner once capital was reapplied.
  • They should have results on a number of potentially stock moving wells prior to year end including their first in the Eagle Ford, three more of their bread and butter wells in the mid-Bossier. 
  • The name is cheap to Street estimates for 2011 EBITDA and CFPS... 
  • ...But they are in debt, with net debt to cap of 53% ...
  • ...And a somewhat fully valued TEV to reserves measure since their reserves are gassy and have been marked lower by low gas prices.
  • So in a nutshell, I'm not falling in love here. Though I do own it in the ZLT, I will be looking to reduce on further strength towards $4 in coming months should that occur. Unless they just blow the doors off the Eagle Ford, which, given that its Bee County, I highly doubt will happen. Another unless comes up if they get a good price for their Niobrara acreage or decide to drill it with an experience operator. 

GMXR - GMX Resources

  • I track them as one of the nearly pure play gas names out there in the Haynesville small cap shale realm.
  • The name has gone through a series of ramps up and down in terms of capital activity and is currently scaling activity back (by subleasing rigs they have contracted).
  • Acreage/Reserves: 42,400 net acres in the Haynesville, almost all HBP. Sees 1.35 Tcfe potential reserves here and another 0.9 Tcfe in Cotton Valley sands vs current proved reserves of 0.442 Tcfe (73.7 MMBOE)
  • I'm not really interested in it at this time but would be should they take another leg lower ... as a potential buyout candidate.

I plan to add two more names tomorrow and another three or so more midgets to round this list out next week.

 

Other Stuff:

  • WLT announces proposal to acquire WTN for $3.4 B
    • Would create one of the largest publicly traded metallurgical coal producer
    • They are of similar size presently (6.6 mm tons per year at Walter this year and 6.1 mm TPY at Western)
    • WTN has agreed to work with WLT in its due diligence effort for the next 2 weeks. 
    • WLT has also agreed to acquire 20% of WTN from its largest shareholder. 
    • Best guess is the deal happens; I don't know much about Western but will be doing my own look at the acquisition price relative to their reserves and earnings power this morning. 
    • Rumor has been in the market that MEE was both on the hunt and hunted. 
    • Probably puts a boost in other names except BTU and ANR who are seen as potential acquirers of MEE
  • Look for the mid-cap Orange Charts in the Friday post

Odds & Ends

Analyst Watch:

  • NFX - FBR had dinner with the COO last night, reaffirms potential, reiterates Outperform and $72 target. No mention made of the Marcellus acquisition in what I read. 
  • XEC - UBS bumps target by $11 to $91, maintains Buy

Interesting Reading Watch:

168 Responses to “Thursday – Oil Review Plus Natural Gas Preview Plus Parade of Midgets”

  1. 1
    zman Says:

    Front and Center Watch:

    Looking for exits into opening strength on November calls, specifically:

    the 80 HAL $36 Nov calls and

    the 5 remaining NFX $65 Nov Calls.

    MMR $18's and $17s are probably skuds. but will watch for signs of life in the lower strikes. 

    Watching WLT to see how far it falls, looking for a re-entry point

  2. 2
    Zorgnak Says:

    Normal
    0

    false
    false
    false

    EN-US
    X-NONE
    X-NONE

    MicrosoftInternetExplorer4

    /* Style Definitions */
    table.MsoNormalTable
    {mso-style-name:”Table Normal”;
    mso-tstyle-rowband-size:0;
    mso-tstyle-colband-size:0;
    mso-style-noshow:yes;
    mso-style-priority:99;
    mso-style-qformat:yes;
    mso-style-parent:””;
    mso-padding-alt:0in 5.4pt 0in 5.4pt;
    mso-para-margin:0in;
    mso-para-margin-bottom:.0001pt;
    mso-pagination:widow-orphan;
    font-size:11.0pt;
    font-family:”Calibri”,”sans-serif”;
    mso-ascii-font-family:Calibri;
    mso-ascii-theme-font:minor-latin;
    mso-fareast-font-family:”Times New Roman”;
    mso-fareast-theme-font:minor-fareast;
    mso-hansi-font-family:Calibri;
    mso-hansi-theme-font:minor-latin;
    mso-bidi-font-family:”Times New Roman”;
    mso-bidi-theme-font:minor-bidi;}

    Looking at HAL this morning in my crystal ball.
    On the intraday chart
    It will have hit my target at 36.27 overnight.
    http://www.charthub.com/images/2010/11/18/Stock_Intraday
    On the composite chart we’re beginning to run into the very low volume areas from the effects of the “Macondo” selloff. For me that means I expect we may see a rapid rise to the upper value areas of 37.06 and then 37.60 once we clear 36.62.
    http://www.charthub.com/images/2010/11/18/Stock_Composite
    I see 36.05 as the value area on the downside as immediate support if I don’t get what I expect.
    Thanks for the suggestion of the HAL calls
     

    Normal
    0

    false
    false
    false

    EN-US
    X-NONE
    X-NONE

    MicrosoftInternetExplorer4

    /* Style Definitions */
    table.MsoNormalTable
    {mso-style-name:”Table Normal”;
    mso-tstyle-rowband-size:0;
    mso-tstyle-colband-size:0;
    mso-style-noshow:yes;
    mso-style-priority:99;
    mso-style-qformat:yes;
    mso-style-parent:””;
    mso-padding-alt:0in 5.4pt 0in 5.4pt;
    mso-para-margin:0in;
    mso-para-margin-bottom:.0001pt;
    mso-pagination:widow-orphan;
    font-size:11.0pt;
    font-family:”Calibri”,”sans-serif”;
    mso-ascii-font-family:Calibri;
    mso-ascii-theme-font:minor-latin;
    mso-fareast-font-family:”Times New Roman”;
    mso-fareast-theme-font:minor-fareast;
    mso-hansi-font-family:Calibri;
    mso-hansi-theme-font:minor-latin;
    mso-bidi-font-family:”Times New Roman”;
    mso-bidi-theme-font:minor-bidi;}

  3. 3
    milepost_43 Says:

    More BAKKEN PL capacity keeps moving along…
    CALGARY – TransCanada Corp. expects to see strong interest in its proposal to ship light oil from Montana to markets further south, an executive with the pipeline giant told investors and analysts Wednesday.
    A so-called "open season" — in which potential customers are invited to bid to ship their oil on a proposed U.S. pipeline project called Bakken Marketlink — wraps up Friday.
    "We haven't got the final bids, but we've so far seen a significant amount of interest," said Alex Pourbaix, who is in charge of TransCanada's oil pipeline business.
    "We do anticipate a successful open season for this project."
    Bakken Marketlink would ship 100,000 barrels of crude a day from Baker, Mont. — in the heart of the Bakken oil zone —to a massive storage hub in Cushing, Okla., and to refineries along the U.S. Gulf Coast.
    The Bakken play is a huge light oil pool that stretches through parts of Saskatchewan, North Dakota and Montana.
    There is not enough pipeline capacity in the Bakken to get crude to market, so producers in the play have been forced to sell their product at a discount, Pourbaix said.
    TransCanada expects to announce the results of its Bakken open season early next year. It is expected to be in-service in 2013.

  4. 4
    Zorgnak Says:

    Yikes..sorry about that.

  5. 5
    Zorgnak Says:

    Looking at HAL this morning in my crystal ball.
    On the intraday chart
    It will have hit my target at 36.27 overnight.
    http://www.charthub.com/images/2010/11/18/Stock_Intraday
    On the composite chart we’re beginning to run into the very low volume areas from the effects of the “Macondo” selloff. For me that means I expect we may see a rapid rise to the upper value areas of 37.06 and then 37.60 once we clear 36.62.
    http://www.charthub.com/images/2010/11/18/Stock_Composite
    I see 36.05 as the value area on the downside as immediate support if I don’t get what I expect.
    Thanks for the suggestion of the HAL calls

     

  6. 6
    zman Says:

    Thanks Zorg, i have some December calls as well that I will leave on for awhile. 

  7. 7
    Zorgnak Says:

    re 6
    Me too.

  8. 8
    BirdsofpreyRcool Says:

    zorgnak — you speaks a language i donts understand…. 😉
     
    But i likes your comments on HAL.  thanks!

  9. 9
    BirdsofpreyRcool Says:

    Bet = we hear what Schiller is planning to do with the money next week.
    Dept + Equit = Assets.
    We know the "equity" part (deal they just did)… think we get the other two parts next week.  Then we can solve the equation and see if Schiller is still the Acqtn Genius he has been in the past.

  10. 10
    zman Says:

    Better article on the Tyler:

    http://www.minotdailynews.com/page/content.detail/id/549326/Formation-creating-interest.html?nav=5010

  11. 11
    zman Says:

    If you are looking for a name that might benefit from some early Tyler Formation hype, check out the map in the link in 10, note Stark county, then see WLL, that's overlying their Three Forks play in Lewis and Clark, where the m. Bakken is pinched out. See article below from September commenting on WLL's continued interest in the county.

    http://www.kxnet.com/getArticle.asp?ArticleId=637397

  12. 12
    Nicky Says:

    Morning all.  Resistance is at 1194 – 97.  Support now at 1187, then 1178.  If the resistance above doesn't not turn the market back down and IF we can make a higher high tomorrow then the cycle lows are in and we are up into end of November early December.  The slightly more bearish count says there is another low out there around 1168 – 70.  Personally I favor the more bullish count.

  13. 13
    BirdsofpreyRcool Says:

    Analysis published on Bloomberg this morning.  Refers to futures (of course), but seems to agree with your levels, Nicky. 
     
    US STOCKS/OPINION: BTIG on today's technicals – "Doji candle yesterday which generally points to the current move losing steam. A near-term hold of support after this harsh move from the highs would not be a startling development and with the futures up over 1% this morning that appears to be the market's intentions. 119.80 – 120ish will be the big short-term test for the SPY as that has been an important range over the past month or so. The market's reaction there should be telling.
    Volume will be a big factor today as well, as a below average day would highlight sellers just taking a breather rather than real buyers stepping in and taking a stand."

  14. 14
    zman Says:

    Morning Nicky – thanks much, glad to have you back. 

  15. 15
    zman Says:

    ZTRADE – ZIM – HAL

    HAL – Sold the 80 HAL November $36 Calls for $0.50, up 121% to my average cost with the stock at 36.20. I continue to own the 25 December $40 calls. 

  16. 16
    zman Says:

    ZIM back up to 51% cash

  17. 17
    zman Says:

    NOG bumping up to $20, still have not heard a word on timing of pricing, would guess tonight. 

  18. 18
    petra Says:

    test

  19. 19
    tomdavis12 Says:

    Z: DRYS had some very positive things to say about the supply & demand for UDW rigs. I believe they own some. Bill if you have anything to add about DRYS, please share. I still believe a value investor that can look past the legal issues can look at RIG as undervalued. If more old rigs can be cold stacked as NE did last night, maybe the supply side can come more into balance with demand. 

  20. 20
    zman Says:

    see you

  21. 21
    zman Says:

    Thanks Tom – saw they reported, didn't see the comments as I've pretty much tuned them out. I don't trust much of what they say but will go read. Was it in the pr or in the call transcript?

  22. 22
    tomdavis12 Says:

    irongate: Good call on CLNE and the Cramer connection.

  23. 23
    tomdavis12 Says:

    21: On the CC I believe.

  24. 24
    zman Says:

    WLT up on their proposed acquisition. 

  25. 25
    tomdavis12 Says:

    21: I also believe they were talking their book. I too do not know DRYS. Maybe Bill can throw in his 2 cents.

  26. 26
    zman Says:

    Leading indicators up 0.5%

    Philly Fed at 22.5, much higher than expected. 

  27. 27
    zman Says:

    NFX breaking out into new high territory for this cycle, all time high was just under $70 in May 2008 (with $140 oil and $14 n gas)

  28. 28
    zman Says:

    and I'm about to punt my remaining NFX $65 strike calls. 

  29. 29
    zman Says:

    ZTRADE – ZIM – NFX

    NFX – Sold the remaining (5) NFX November $65 calls for $2.25 (on the mid and easily), up 483%, with the stock at 67.15. 

  30. 30
    john11 Says:

    EXXI, trading well.

  31. 31
    tomdavis12 Says:

    Z: ATW out after close if you still have an interest. 

  32. 32
    BirdsofpreyRcool Says:

    EXXI … i could be wrong… according to the price action, we could hear about the asset purchase at any time

  33. 33
    zman Says:

    Thanks Tom, will listen tomorrow. Their pr's are from the land of the flavorless. Have not been keeping up with them of late (basically since May). 

    Thanks BOP.  Here's to hoping they take some of the extra WI% off MMR's hands. 

  34. 34
    bill Says:

    Tom,
    I think the ceo of drys is no better than Bernie Madoff therefore I wont touch it no matter what it sells at.
    He, as ceo, engineered a number of self serving deals that cost the shareholders of drys over a billion dollars minimum
    On one deal, he tried to sell 8 used capes to drys from his private company, when the market values were crashing at all time highs of 135 m each. Current value is about 60 m for a new ship. the guy is a crook, plain and simple. He uses Drys as his personal piggy bank
    The stock is down from a high of 130 to 5. I would never buy this company while he is still involved

  35. 35
    BirdsofpreyRcool Says:

    I've got mixed feelings about EXXI taking a higher %age of the Ultra-Deep Play with MMR.  They got their ownership at a time when JB needed the money and the backing.  Now, not so much.  So, obviously, the pricetag would be higher.  Guess it all comes down to how much is paid for what.  But will be happy if they do not take the %age higher…. and will be happy if they take the %age higher at a good price. 

  36. 36
    tomdavis12 Says:

    Philly Fed Index goes from 1 to 22.5. Highest since 4/05. WOW

  37. 37
    Nicky Says:

    Oil looks very weak compared to the broader market.  It needs to get going imo.

  38. 38
    zman Says:

    GST – in tomorrow's post as a midget. I hold it in the ZLT and today it is making a new high since we added it and more importantly, cracking up through the 200 day SMA. I can get to a ridiculous number there based on their Marcellus acreage alone and recent deals (two big one in two weeks). 

  39. 39
    BirdsofpreyRcool Says:

    EXXI — recent price action has also been mega-squirrely due to a sloppy seller.  Guess that guy is done.  What we could be seeing is EXXI finding a new price level, post selling pressure.
     
    But lots of ways for the stock to go up, between now and EOY.  Just waiting to hear what comes out first….

  40. 40
    zman Says:

    Gas numbers in 4 minutes.

    Orange charts tabled until Monday due to new server testing scheduled for tonight.

    Will have at least 2 more SDMs in the morning post, GST and VYOG. SSN I've essentially beat to death so won't include. TAT is a special case and my interest there is on the bubble at the moment anyway. Some of the other names mentioned earlier this week will get included next week. If you have not interest in penny stocks I completely understand, they are only slightly less dangerous than options. However, we do have a number of subscribers who like to learn about them and I aim to please.

    OK, gas numbers in 1 minute. 

  41. 41
    zman Says:

    3 Bcf . Draws in the East and West regions. 

    Gas now 0.3% over year ago

    Now up 9.3% to the 5 year avg

  42. 42
    zman Says:

    re 39. Any word on timing of further logs from either DJ2 of BBE? We're in section now on the former and should have seen lots more potential pay in the latter. 

  43. 43
    bill Says:

    ng ep companies doing better than the commodity.
     

  44. 44
    tomdavis12 Says:

    BOP: I am still surprised at how much premium in the EXXi Dec 30 calls. Even the most recent takeouts have been 35% higher only. There is NO big money in these options but apparently BOP you are not the only one with year end expectations. 

  45. 45
    zman Says:

    Agreed. Seems early to me. My HK has been doing just OK, the SWN has been bumping up nicely. Seems unlikely to get a lot of support from the commodity over the winter though. Lack of hedges in 2011 vs 2010 is going to be a problem that will eventually help the commodity but the unhedged stocks are going to either get expensive on forward multiples or, um, fall. 

  46. 46
    BirdsofpreyRcool Says:

    EXXI — when Leon Cooperman joined me at the party, I knew I was in the right room.  It's been a wild ride… but it's far from over.

  47. 47
    tomdavis12 Says:

    Maybe Leon listens to you and the Z-meister. Stay tuned. 

  48. 48
    BirdsofpreyRcool Says:

    z — as far as DJ2 and BBE logging runs…. both wells still are pushing the drill bit.  Until they have to change bits, they will continue to drill (and not log).  But can't keep the same bit forever (even if it IS making great headway).  So, eventually they will have to pull the string and lower the logging tool.  Just a matter of time.

  49. 49
    BirdsofpreyRcool Says:

    Ha!  And found out why the wells were permitted to "29,900 ft" when it's clear that JB wants to drill deeper.  29,900 ft is the max depth that PXP could drill a well, without receiving 100% board approval.  So, mystery 'splained!

  50. 50
    zman Says:

    re 48 – OK, had thought with the lower pressure and temp seen in BBE that they were using LWD tool. 

  51. 51
    BirdsofpreyRcool Says:

    z — #50 yeah… don't know that they aren't. 

  52. 52
    zman Says:

    re 49. Ha, yeah right, like he wasn't going for the Tuscaloosa all along, lol. 

  53. 53
    zman Says:

    JB – can you take a look at the SSN base being formed? 

  54. 54
    choices Says:

    GM @~$35.50, up 7.5%, 227 mil shs, go figure

     

  55. 55
    elduque Says:

    Treasuries are getting whacked!! Any thoughts BOP?

  56. 56
    tomdavis12 Says:

    GM options will start to trade 11/29. Extremely quick to market. Should help the stock.

  57. 57
    zman Says:

    Scroll to bottom:

    https://www.dmr.nd.gov/oilgas/riglist.asp

    160 rigs in ND, that's a new record. Good for NOG. 

    Going to add another WLL positions as they have well control in Lewis and Clark on over 200,000 net acres that would appear to be prospective for the Tyler based on the maps I've seen so far. Street may rush to give them some credit for this well before a new well is drilled to test it. 

  58. 58
    bill Says:

    dnr has an analyst day today  3 pm est
     
    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0OTIyfENoaWxkSUQ9NDEzNjA4fFR5cGU9MQ==&t=1

  59. 59
    zman Says:

    ZTRADE – ZIM – WLL

    WLL- Added (10) WLL December $115 Calls for $1.40, on the mid and pretty quickly with the stock trading at $107.25. Thinking is that they are going to release an operations update fairly soon with further details on their drilling in the fairway of their Lewis and Clark play in SW North Dakota. Also, the market is buzzing with new speculation about the Tyler Formation, some 2,000 shallow to the middle Bakken and extending south into South Dakota. If history is a guide, market participants will look for names with potential exposure and WLL should be in that category.   I continue to own the DEC $110 calls and the common in the ZLT. 

  60. 60
    BirdsofpreyRcool Says:

    elduque — i sold all my treasury exposure the other day (by selling out of high-grade bond funds).  As said before, 10-yr treasuries at 6% are an investment…. at 3% they are pure speculation.  I don't like the risk/reward trade off at that level.
     
    The world is awash in US Treasuries.  They are still the Best Looking Gal at the Global Ugly Bug Ball…. but there are too many of 'em.  Supply and demand.  There are better looking investments out there.
     
    Remember that we talked about the Chinese getting tired of buying USTs and moving into US stocks?  Well…. they bought a bunch of GM… and they are not going to stop there.  The horse is out of the barn and enjoying a romp through the field of cheap US equities.  And that horse is BIG. 

  61. 61
    zman Says:

    Treasuries fall out of favor, interest rates soar and then the deficit really balloons. Uh oh. 

  62. 62
    zman Says:

    MMR $17 calls awake and trading in penny increments with the stock up 4.5% and trying to catch EXXI. 

  63. 63
    BirdsofpreyRcool Says:

    Congress has had us all living on borrowed time for 20 years.  It's funny…. Congress sets the budget, gets to decide what to spend, what to borrow… but when the sh*t hits the fan, they tell all of US that WE have to "suck it up, tighten our belts and pay more of our money to them."  Somehow WE have made a mistake… and they are just there to help us out of it. 
     
    And we fall for this bullsh*t by reelecting the same Baffoons who couldn't balance their own checkbook… and we pay them pretty darn well to do that sh*tty job to boot.

  64. 64
    BirdsofpreyRcool Says:

    HAL going hockeystick.  Thank you for all your great work there, JB and Zorg.

  65. 65
    zman Says:

    BOP – I take it you saw the study out yesterday that showed Congress average net worth rose 16% in 2008/2009 while the market fell 40% or so and the real estate market buckled. Must be nice to be that insulated from reality.

  66. 66
    tomdavis12 Says:

    TBT is a short treas ETF. With JB's help maybe that is a way to survive the rising rate dilema.

  67. 67
    Zorgnak Says:

    HAL hit my first target for today 37.06  🙂
    Extended (a stretch) target 37.60
     

  68. 68
    zman Says:

    Has anyone heard anything on what GST might have paid for their most recent Marcellus acreage acquisition, any musings from the sell side. 

  69. 69
    zman Says:

    Good job Zorg – given the short amount of time left in the Novembers I had to punt. May take profits in the Dec $40s soon as well as those are a bit out there and the stock is collapsing the multiple gap between it and SLB quickly now. 

  70. 70
    elijahwc Says:

    MHR – " #132  looks really good, staging ascending triangle, formation suggests a near term break to al least $5.50"  JB 11/17/10
    JB, done your way!  New all time high @ 5.56. 

  71. 71
    BirdsofpreyRcool Says:

    the problem with shorting USTs is that there will always be a global crises somewhere at some time…. then all the rabbits run for cover in the US Treasury Market.  So, just when you are feeling scared, your TBTs add insult to injury. 
     
    In the longer run, i think bond rates are headed higher… if for no other reason than there are better looking investments out there.  Still, I don't have the nerve to go long the TBT (for the reasons laid out above… it's still a dangerous world and who knows what Athens or Lisbon or Palestine might do, on any given day).
     
    One thing i can say for Uncle Ben, however…. is that guy knows EXACTLY what to do, at PRECISELY the wrong time.  Focus on INflaiton (when deflation was digging the abyss)… Focus now on DEflation (when the cost of stuff in the US is going to continue to go up.  Except for housing.  Govt won't get out of the way and let that asset class settle out and clear.  Idjits.)

  72. 72
    Zorgnak Says:

    re69
    May have seen the highs for the day….Sold Nov's

  73. 73
    zman Says:

    Eli – nice job there. Thinking we are seeing a lot of new highs. Probably too many right now given how gassy many of these names are. 

  74. 74
    zman Says:

    MMR going for $17 and trying to save me one scud on the month (the $18s just not going to get there). 

    BOP – any thoughts on the GST buy price? They could not have paid the going rate of $8 to $9,000 per acre, they don't have that kind of firepower. Anyone see anything on that?

  75. 75
    BirdsofpreyRcool Says:

    z — until we hear what GST's JV partner (Antim, Korean investment firm) wants to do (participate or pass), we won't know the impact on GST.  Given that GST said they could fund the acqtn internally, however, implies that they paid (at most) the total of cash on the BS + avail revolver / the number of acres. 

  76. 76
    jiveyjr Says:

    First of April the 30 yr yield was 4.85 and now it is 4.31…I catch a lot of heat from a kid married to one of the grandkids around here.  he works for a hedge fund and talks to me about his ideas and so forth.  I told him that I don't like fighting the government on the treasury trade, but that I understood completely where he was at.
    If yields take out 4.85, like a knife through butter, then I'll reconsider.  Thus far, it looks to me like we are just retracing back up and have gone about 62% of the way from high to low…that could be it for now; who knows. 
    I'd rather sit here with BOP, singing "Please Permit Me Let Me Go" on ATPG than fight the guberment on this treasury trade …but this grandchild's husband is smart too and could win this trade…but for now he will do it without me and his grandmother-in-law

  77. 77
    reefguy Says:

    GST- Cash on hand 7 MM, 47MM on revolver.  They bought 59k acres and they said they can do it without outside financing.  My interpretation then is they paid less than $54MM; less than $915/net acre.

  78. 78
    zman Says:

    Reef – Thanks much was just doing that math and thinking that is a low, low price. This stuff off the beaten path?  Also, I assume that the JV partner will come in for a piece or we will see a secondary to balance out the balance sheet. 

  79. 79
    Zorgnak Says:

    Re 74    Anything beyond 17 without news seems like it would be a gift. Not much volume on this move today.
    http://www.charthub.com/images/2010/11/18/MMR_IntraDay
    http://www.charthub.com/images/2010/11/18/MMR_Composite
    Long the common

  80. 80
    choices Says:

    Muni's getting hammered, not surprisingly:
    http://stockcharts.com/h-sc/ui?s=$NMUNI&p=D&yr=0&mn=3&dy=0&id=p99115853522&listNum=16&a=214576043

  81. 81
    BirdsofpreyRcool Says:

    jivey — #76, enjoyed your comment.  Agreed.  Just not gonna fight that battle.
     
    It's funny, tho.  I almost posted on ATPG.  It is a total "waiting on the government" game right now.  The "Moratorium" may have been technically lifted.  But Bummer is having the Last Laugh with their "Permit-atorim."  Can't sue the govt b/c it moves too slow, can ya. 
     
    sheesh.  and Double Sheesh!!

  82. 82
    bill Says:

    Just waded thru the DNR presentation..very impressive… best kept secret…they have Bahken exposure

  83. 83
    bill Says:

    You gotta like the nog move, 20 .50 now

  84. 84
    zman Says:

    re 79. From a fundamental standpoint, what brought it down from the time of their call was hogwash. But can't disagree with you on the chart. I think it goes higher solidly when they announce definitive pays in both wells. Am long the common as well in the ZLT. 

  85. 85
    zman Says:

    re 82. DNR – still have that bottle of wine from them on my shelf. Still like their tertiary recovery operations. But I don't own the name and have not in probably 10 years (which means the wine, Premier Cru De, is likely bad now but I like the derrick on the front of it so I keep it around). I don't have them on the Bakken acreage list, will go check. 

    re 83. Very much so. Feeling a little less silly about that low $19's trading position added the day before the deal. 

  86. 86
    BirdsofpreyRcool Says:

    Munis are different animals than USTs.  They are pretty much 100% a retail market and highly affected by supply (and demand).  Right now, with the BAB window closing and approaching the end of the year, issuers are trying to get new issue out the door while buyers are not adding to their risk trades.  So, more supply, less demand… Muni yields go up.
     
    Guy on BlackRock on CNBC saying he thinks munis are a buy here.  I tend to agree, fwiw.

  87. 87
    jiveyjr Says:

    BOP…it's a time arb thing on ATPG like you posted some time back, I think we just have to be patient here.  thx for prompting me on that one….it should be a nice winner in time…and the longer the guberment delays the higher the price of oil to help compensate for the irritation.

  88. 88
    Zorgnak Says:

    Re 84
    I put the wrong intraday chart up…sorry
    Same smell though…  http://www.charthub.com/images/2010/11/18/MMR_IntraDay_2
    Long and looking to add

  89. 89
    zman Says:

    ZTRADE – ZIM – HAL

    HAL – Sold the (25)HAL December calls taken earlier this week for $0.56, up 59% with the stock at $37.33. Feels a bit quick to me and these are far enough out of the money that any significant pullback would result in me round tripping the trade. No sense in doing that. So, waiting on a pull back to buy these back or a lower strike, probably next week. 

  90. 90
    BirdsofpreyRcool Says:

    z — great trades on your HALs.  No reason to try to ride to the bitter end… ca-CHING!  Love the sound of money hitting the drawer!

  91. 91
    zman Says:

    BOP – Thanks, hoping you are doing as well as well 😎

  92. 92
    Zorgnak Says:

    Thanks for the HAL trades Z
    Very nice!

  93. 93
    zman Says:

    Things you don't do watch:

    http://sports.yahoo.com/soccer/blog/dirty-tackle/post/Nani-ruins-Cristiano-Ronaldo-s-wonder-goal-again?urn=sow-286806

  94. 94
    BirdsofpreyRcool Says:

    z — i don't do your option trades… on the RARE occassion when i do, they don't work for me… so i do you a favor and stay away.  I (very) occassionally day-trade… but it's almost always swing-trade or buy-and-hold-until-proven-wrong.  Big fan of the "time arb" concept.  And that doesn't work well with the short fuse on options.  We all have to find our cozy spot on the risk/return spectrum.  Anything else gets your panties in a twist.  And THAT is uncomfortable!
     
    YOU, however, have a nose for options and timing.  (I just have nasal blockage.)

  95. 95
    choices Says:

    #63-I think you are being too kind, BOP.

  96. 96
    ram Says:

    ZMAN, could you include RAME?

  97. 97
    zman Says:

    BOP – I'm far from perfect with the option stuff and, as you know, it's a small chunk of my assets due simply to fact that some drunk bank in Ireland can wreck an otherwise perfectly good plan.

    Back to the GST. Sounds like they scooped it, running some checks on well results in those WV counties they mention in the pr. 

  98. 98
    BirdsofpreyRcool Says:

    choices — yes.  I am.  But what I REALLY want to say, i don't think z would let me post. 

  99. 99
    zman Says:

    Ram – RAME is on the burner for next week. 

  100. 100
    ram Says:

    Thanks.

  101. 101
    zman Says:

    re 98. Yeah, it's a PG13 family show around here, tough for BOP to stay in the lines but usually she finds a way. 

  102. 102
    BirdsofpreyRcool Says:

    yeah… i used to be a Lady…. until i worked on a trading desk for a coupla yrs.  You learn ways of expression you never even knew existed!  😉

  103. 103
    zman Says:

    Re TAT – fair warning, another few weeks and we should here word on an important well re-entry and deepening, looking for an oil leg. The company has been in continual delay mode with targets missed by wide margins due to changes in plans that are voiced in passing on conference calls. I have to tell ya, that's not my kind of game. Stock has advance recently with most other things and the promise is now to get really rolling with the in Turkey frac crews and to get the exploration program rolling. I'm just about done waiting on them to stop acquiring things and start successfully executing on the exploitation side of the equation. The exploration angle is tougher I know but they need to pull off a success in that program from time to time as well. 

  104. 104
    BirdsofpreyRcool Says:

    GST — they are Operational straight idiots, but Balance Sheet Idiot-Savants.  I think this latest Marcellus deal gave us a nice slice of Savant, with ice cream on the side.  Tasty stuff.

  105. 105
    zman Says:

    GST looking good techincally, Zorg, JB?

  106. 106
    tomdavis12 Says:

    Comments from CSFB: Refiners in the US have options to consider as the year ends, both of which are driven by accounting rules and their impacts on tax liabilities. All major refiners now use LIFO accounting methods and with crude and product prices higher than a year ago, it is adventageous to reduce inventories before year end. Additionally, Gulf Coast refiners in Texas and Louisiana have ad valorem liabilities associated with the value of holdings at year-end, independent of LIFO accounting. That always makes it advantageous to reduce inventories and tax liabilities. In this sense, the reduced imports and reduced inventories might well continue to buttress markets going into year-end and may serve as a false indicator of where markets are likely to move come January.

  107. 107
    ram Says:

    Mentioned above – more premium in EXXI DEC 25's compared to BEXP DEC 25's – interesting.

  108. 108
    Zorgnak Says:

    Bingo   HAL reached to within .02 of  extended target for the day. 37.60 Wow!
    Last dregs of the December Calls overboard
    Thanks again Z.

  109. 109
    ram Says:

    Re 94 – I'm with you on options lately – keep getting roasted – longer term stuff much better.

  110. 110
    Zorgnak Says:

    re 105
    GST doesn't trade enough volume for me to be very precise but the breakout looks pretty sweet on multiple time periods.
    Good volume on the break.
    Long GST

  111. 111
    Jerome Blank Says:

    #53, SSN, still holding on to the daily 100 day/long span ascending triangle support zone at about $1.20. Updated the 30 min to get a closer look, if thinking of trying an SSN long, this is a good spot, if using stops, they need to be below $1.18, nearby swing to resistance at $1.24, longer term swing, topside daily ascending triangle test at $1.50….
    #70, elija…congrats on the MHR trade, intraday near term price obj reached 

  112. 112
    PackMan Says:

    wassup w/ MMR ?

  113. 113
    elduque Says:

    Looks like we have found buyers in NG contract.

  114. 114
    zman Says:

    Thanks much JB

    Packman – ketchup time. See EXXI.

    Just got off phone with BSIC. Another call with them tomorrow. I expect some news there in the next coupla months. I'm not adding or selling anything based on that call. 

  115. 115
    BirdsofpreyRcool Says:

    MMR — drilling reports on DJ2 and BBE sound positive.  At some point, they will have to 'fess up publicly as to what is going on there.  Buzz is positive… but that can be a two-endged sword, of course.

  116. 116
    Jerome Blank Says:

    GST…II'l just add a few bits, GST broke nicely thru the 200 day off that consolidation bull flag, it's now at an area of P&F trendline resistance, a print of $4.50 breaks resistance and puts GST back on a P&F buy signal,  thinking that if it's going to go materially higher near term, would like to see pullbacks to $4.20 to $4.25  hold. $4.50 is the spot to watch…. 

  117. 117
    bill Says:

    re : dnr
    30 % of next year cap ex directed at bahken. Increasing rigs from 4 to 5
    pages 71-75 of todays presentation
     

  118. 118
    zman Says:

    JB – while I have you, hows that WLL looking? We've been a number of times into this top end of a what I call a flag. 

  119. 119
    PackMan Says:

    z, BOP thanks.   Gotta love option expiration weeks …. shenanigans rule.
    I am happy to profit from it !

  120. 120
    BirdsofpreyRcool Says:

    OT:  This man is a skunk (and i apologise to skunks for the insult)… and yet, our govt put him at the head of GM… just in time to fire Wagoner and claim all Rick's hard work for himself.  "Rat-tner"… sometimes the name, says it all.
     
    Rattner Settles With SEC on Kickbacks as Cuomo Sues (Update2)
    2010-11-18 18:28:55.679 GMT
     
    (Updates with comment from Cuomo’s office in 26th
    paragraph.)
    By Joshua Gallu, Karen Freifeld and Bob Van Voris
    Nov. 18 (Bloomberg) — Steven Rattner, the former head of Quadrangle Group LLC, will pay $6.2 million and accept a two- year ban from associating with broker-dealers or investment advisers to resolve a Securities and Exchange Commission probe of kickbacks in connection with the New York state pension fund.
    The sanctions include a payment of $3.2 million in disgorgement and a $3 million fine, the SEC said. New York Attorney General Andrew Cuomo sued Rattner today as well, seeking at least $26 million and his immediate lifetime ban from the securities industry in New York, according to an e-mailed statement. Richard Bamberger, a spokesman for Cuomo, said there was no settlement planned with Rattner.
    "While settling with the SEC begins the process of putting this matter behind me, I will not be bullied simply because the attorney general’s office prefers political considerations instead of a reasoned assessment of the facts," Rattner said in an e-mailed statement. "This episode is the first time during
    35 years in business that anyone has questioned my ethics or integrity."
    Cuomo’s lawsuits were filed on the day General Motors Co., which went bankrupt last year, advanced as much as 9.1 percent in its return to public trading following a $20 billion initial public offering. Rattner is the former head of the U.S.
    government’s auto task force that oversaw GM’s restructuring.
    SEC Complaint
    According to an SEC complaint filed in Manhattan federal court, Rattner and Quadrangle won $150 million in investments from the state pension fund in 2005 and 2006 as part of a pay- to-play scheme.
    "Rattner delivered special favors and conducted sham transactions that corrupted the retirement fund’s investment process," said David Rosenfeld, associate director of the SEC’s regional office in New York.
    As part of the settlement, Rattner agreed to be barred from acting as an investment adviser or broker for at least two years. Offices set up by wealthy families to manage their money are generally exempt from having to register as investment advisers.
    Today’s news follows a plea deal between Cuomo and Henry ‘Hank’ Morris, a former political consultant, under which Morris is to plead guilty to charges related to the probe that carry a maximum sentence of 1 1/3 to four years in prison.
    Cuomo said in a statement today that he added Rattner as a defendant in a forfeiture action pending in New York state court against Morris and David Loglisci, former head of alternative investments at the state pension fund.
    $13 Million
    The attorney general also filed a lawsuit seeking $13 million in civil recoveries and millions of dollars in future fees and profits, according to the statement. Additionally, Cuomo said he filed an application for Rattner’s immediate ban from the securities industry in New York.
    "The application for an immediate securities ban is based on the fact that Rattner engaged in fraud and refused to answer
    68 questions based on his Fifth Amendment privilege," Cuomo said in the statement. "Rattner was willing to do whatever it took to get his hands on pension fund money including paying kickbacks, orchestrating a movie deal, and funneling campaign contributions."
    Rattner said in his statement that he would fight Cuomo’s "politically motivated" lawsuits.
    Morris was at the center of Cuomo’s probe of corruption at the state pension fund. He was facing more than 70 charges related to the investigation. On the top charge, he faced as many as 25 years in prison.
    Morris reaped $19 million in fees for himself through 23 state pension-fund investments for which he acted as an undisclosed placement agent, or middleman, according to Cuomo.
    ‘Most Important Cases’
    "This case is, in this court’s opinion, one of the most important cases relating to corruption in government in the state of New York and perhaps one of the almost seminal cases involving that in the country," New York State Supreme Court Justice Lewis Stone said at a hearing related to Morris’s deal.
    Rattner, 58, arranged to retain Morris, the former chief political consultant to ex-New York Comptroller Alan Hevesi, as a placement agent. Rattner also tried to set up a DVD distribution deal with a company owned by one of Quadrangle’s private-equity funds, for a movie produced by Loglisci and his brothers, according to the SEC.
    When the company said it wasn’t interested, Rattner sent an e-mail to the head of the firm, instructing him to "dance along" while he figured out whether Quadrangle needed to do the deal to secure an investment from the retirement fund, according to the SEC’s court filing.
    Hevesi Plea
    Hevesi, 69, pleaded guilty last month to participating in the scheme at the pension fund, which he once ran. He was the highest-ranking official convicted in the three-year investigation by Cuomo, who was elected governor of New York earlier this month.
    Morris is awaiting trial on charges he corrupted the investment process to benefit money managers who made campaign contributions and politically connected placement agents who received lucrative fees, including himself.
    At least six other people besides Hevesi have pleaded guilty in connection with the state probe, 15 firms besides Quadrangle have settled and more than $139 million has been paid to the fund and the state, according to Cuomo.
    Quadrangle has no comment, according to outside company spokesman Andy Merrill.
    ‘Inappropriate, Wrong, Unethical’
    Quadrangle’s settlement with the SEC and Cuomo, publicly announced on April 15, was accompanied by a statement by Quadrangle saying Rattner’s conduct was "inappropriate, wrong and unethical." Cuomo’s office required Quadrangle to make the statement as a condition of the settlement, according to two people familiar with the matter. Quadrangle agreed to pay $7 million to Cuomo and $5 million to the SEC without admitting or denying wrongdoing.
    Quadrangle Asset Management has handled the personal and philanthropic finances of New York Mayor Michael R. Bloomberg, whom Rattner supported through his chairmanship of Democrats for Bloomberg during the 2005 re-election campaign.
    Bloomberg is the majority owner of Bloomberg LP, the parent of Bloomberg News.
    "Mr. Rattner now has a lot to say," Richard Bamberger, Cuomo’s director of communications, said in a statement today.
    "But when he was questioned under oath about his pension fund dealings he was much less talkative, taking the Fifth and refusing to answer questions 68 different times." Bamberger called Rattner’s claims that he did nothing wrong "ridiculous."
    ‘Repeated Threats’
    "Given the attorney general made repeated threats of prosecution, of course Mr. Rattner’s lawyers advised him not to speak," said Davidson Goldin, a spokesman for Rattner.
    Goldin said the decision to file the suit on the day of the General Motors IPO "is further proof the attorney general puts politics and media coverage ahead of the public interest."
    The cases are U.S. Securities and Exchange Commission v.
    Rattner, 10-CV-08699, U.S. District Court, Southern District of New York (Manhattan); and People v. Morris, 0025/2009, New York State Supreme Court, New York County (Manhattan).

  121. 121
    zman Says:

    re 117, thanks will look at that. 

  122. 122
    Jerome Blank Says:

    #118, WLL, yea, it's been pressing that $108 resistance area forming an ascending triangle wedge over the past week or so, looks like it really wants to go higher, updated the daiiy, but if you buy em here anticipating a breakout, I think you have to position size to withstand a pullback to the 20 period/longer term trendline supprt area near $104… 

  123. 123
    zman Says:

    NOG going for $21. Assuming it prices at 20.50 and not the $19 I assumed that's a net raise of  about $180 mm, not $160 mm.

    The price action of the last two days would mean they've been able to pay for half of this year's acreage purchases out of thin air. Pretty nifty. Or looked at another way, they could pick up nearly 1/3 of their rumored 2011 land adds for this difference. I'd price tonight fellas.  

  124. 124
    zman Says:

    Thanks JB will go vote now. Expecting news there, probably next week. 

  125. 125
    RMD Says:

    NOG thought: might look at how AREX reacted to its 2ndary and then promptly tacked on 25% because of unrequited demand.

  126. 126
    zman Says:

    Listening to the WLL presentation from yesterday at BofA for any new tidbits

    http://www.veracast.com/webcasts/bas/credit2010/id62322750.cfm

  127. 127
    zman Says:

    re 126 – that's a presentation geared for credit types. 

  128. 128
    RMD Says:

    If this happens to you computer problem: from either nearby lightening or Trojan horse attack which causes computer settings to Net to screwup. In IE: Tools>Internet Options>Connections>LAN Settings..uncheck box for Use proxy server.
    Firefox: Tools>Advanced>Network>Connections> Settings  then check box for No Proxy.
    What a pain, but it worked.

  129. 129
    zman Says:

    RMD – right and BEXP twice before that. Oh and don't leave out KOG which jumped 30%+ post offering

  130. 130
    mimster90 Says:

    no love for HK today. nice HAL trade zman

  131. 131
    zman Says:

    Thanks Mim.  Left quite a bit of cash on the table on closing it but that's not something I look back on and worry about. 

  132. 132
    elijahwc Says:

    #111 MHR, JB Dankeschön
     
    #125 RMD, the word "unrequited " has never appeared on Z's site before.
     
    #125 & 129 MHR obviously needs to come with a big secondary right now…….

  133. 133
    zman Says:

    That WLL presentation in 126 above is one of the better ones he's done. Does a very good job of conveying the complete picture of the company.

  134. 134
    zman Says:

    WLL

    Lewis and Clark comment (350,000 to 500,000 boe per well), smaller than the 750 to 950,000 boe in Sanish, nothing new. 

    Recent well results have been good … nothing new…. gave no hint on the wells I expect to see in a pr as soon as next week. But some new spuds show up on the map and he reiterated that they plan to be at 9 rigs in L&C next year. 

  135. 135
    tomdavis12 Says:

    Z: Secondary be priced tonight for CVI. You follow them at all? 

  136. 136
    zman Says:

    NOG up 8%. It's not the money, it's marketgod's affirmation, LOL. 

  137. 137
    zman Says:

    Sorry Tom, they're a small refiner, don't track em and have been keeping the space at arm's distance. Interesting that they do fertilizer too. 

  138. 138
    zman Says:

    Voted

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  139. 139
    irongate Says:

    getting that late day KOG bump.  it's almost like some trader somewhere has been given an institutional buy order to fill by the end of each day…. he tries all day long to fill it… but there's just not enough stock being offered throughout the day… so at the end of the day he gets more aggressive to complete his order..   This is the way institutions work orders for these little stocks…  one day at a time.   I love it.
     

    as far as treasuries… this is really getting scary… from the moment QE2 announced people been dumping UST's… its scary in that it is the opposite of what the Fed wants.  Could the Fed be losing control of the monetary base?  heck… we had the beginning of a credit crisis in europe this past week… and STILL no real bid for Tsy's… imagine where rates would be if there was no crisis this week.

    Still though.. its too early to tell… but if this goes on for another week I am going to start getting very cautious.  as it is  the 10yr is at early aug levels.

  140. 140
    BirdsofpreyRcool Says:

    When Margaret Patel speaks, it's worth your while to listen
    ——————————————————————————-
     
    Fidelity’s Junk-Bond King Notkin Adds Stocks as Debt Rally Dies
    2010-11-18 05:01:00.7 GMT
     
    By Charles Stein
    Nov. 18 (Bloomberg) — Fidelity Investments’ Mark Notkin, whose high-yield mutual fund beat all rivals over the past five years, said the rally in junk bonds is over and stocks are a better buy.
    The manager of the $12.8 billion Fidelity Capital & Income Fund is putting more money into equities and leveraged loans while cutting back on high-yield bonds, which have soared 80 percent since the start of 2009.
    "I don’t see the value in the high-yield market," Notkin said in an interview at his Boston office. "You are not being paid to take risk."
    Corporate junk bonds climbed last year after the U.S.
    recession ended and the default rate fell. Investors added $55.1 billion to U.S. junk-bond funds in 2009 and this year through September, according to Cambridge, Massachusetts-based research firm EPFR Global. Withdrawals from U.S. equity funds were $129.9 billion in the same period.
    It’s time to shift gears because equities offer bigger gains, said Margaret Patel, who oversees about $1 billion for Wells Fargo & Co. in two mutual funds that invest in both asset classes. Notkin’s fund, which can keep as much as 20 percent of assets in stocks, had 17 percent in equities at the end of September, according to Fidelity’s website.
    "The pendulum has swung from high yield to equities,"
    Patel said in a telephone interview from Boston.
    Patel said that as earnings rise for companies tied to the global economy over the next 12 months, stocks are likely to deliver more than the 6 percent to 7 percent gains she expects from junk bonds.
    Low Yields
    Junk-bond yields that are low by historical standards and the prospect of increasing interest rates will limit gains, Patel said. Firms that issued high-yield securities in the past three to five years may buy back outstanding bonds because the debt can be refinanced at lower rates, she said.
    Speculative grade, or junk, bonds, are rated Ba1 or below by Moody’s Investors Service and BB+ or below by Standard & Poor’s.
    High-yield bonds could outperform stocks if the U.S.
    economy slows, said Patel, because companies would still be able to pay their debts even as profits slump.
    Notkin, 46, joined Fidelity in 1994 as a high-yield analyst covering broadcasting, gaming and lodging. He earned a bachelor’s degree from the University of Massachusetts and a master’s of business administration from Boston University.
    Third in Size
    He took over Fidelity Capital & Income in July 2003. It’s the third-largest U.S. junk-bond fund after the $17.3 billion American High-Income Trust, run by Los Angeles-based Capital Group Cos., and the $13.1 billion Vanguard High-Yield Corporate Fund.
    Notkin’s fund fell 32 percent in 2008, compared with the 26 percent drop in Bank of America Merrill Lynch’s U.S. High Yield Master II Index, as the financial crisis prompted investors to dump risky assets.
    By the end of 2008, Notkin saw an "extraordinary opportunity," when the average yield on junk bonds rose above 20 percent.
    "At that point I thought it made sense to be pressing down on the gas pretty hard," he said.
    Notkin used the fund’s cash stake, which he had built to about 20 percent of the portfolio, to buy the riskiest high- yield bonds.
    Not for Fainthearted
    By Sept. 30, 2009, according to Chicago-based Morningstar Inc., the fund had 35 percent of its assets in bonds rated CCC and below, among the lowest credit ratings assigned by New York- based Standard & Poor’s. The typical high-yield fund had 21 percent in bonds rated that low, according to data compiled by Morningstar.
    "This fund is not for the faint of heart," Miriam Sjoblom, an analyst with Morningstar, said in a telephone interview.
    Fidelity Capital & Income surged 72 percent in 2009, compared with a return of 58 percent for the Merrill Lynch index, Bloomberg data show. In the five years ended Nov. 16, Capital & Income averaged gains of 9.9 percent, the best among
    422 high-yield funds tracked by Morningstar. This year the fund has risen about 14 percent.
    The default rate for junk-rated corporate debt is expected to drop to 2.4 percent in the year ending September 2011 from 11 percent at the end of 2009, Standard & Poor’s said in October.
    Reducing Risk
    Notkin said he has been "de-risking" the fund this year by substituting higher-quality bonds for those of lesser stability. As of Sept. 30, 21 percent of the fund was in bonds rated CCC and below, compared with the 17 percent allocation among his average peer, according to Morningstar.
    With prices on high-yield bonds near all-time peaks and yields near a record low, investors can expect gains over the next 12 months of about 7 percent, Notkin said.
    "The market is fairly valued, if not overvalued," he said. "Compared to high yield, equity is very cheap."
    Notkin expects interest rates to rise to historically normal levels over the next year or two, which could push up yields on U.S. Treasuries in the 5- to 10-year range more than 200 basis points, or 2 percentage points, he said. The yield on the 10-year Treasury note is about 2.88 percent. Bond prices fall when rates climb.
    "We aren’t Japan," said Notkin, referring to a nation where rates have stayed near zero for more than a decade.
    Patel of Wells Fargo said gains in junk bonds will be further restricted as corporations buy back more of their high- yield debt.
    Ceiling on Prices
    "That creates a ceiling on how far prices can advance,"
    she said.
    In April 2009, Notkin’s fund had 5 percent of assets in stocks, filings with the U.S. Securities and Exchange Commission show.
    "If I find opportunities, don’t be surprised if it gets to 20 percent," he said.
    Notkin said stocks have underperformed high yield "dramatically" since he began running the fund. The high-yield index has gained more than twice as much as the S&P 500 over that stretch, Bloomberg data show.
    Stocks also look attractive using other measures, he said.
    The earnings yield on the S&P 500, the index’s total earnings divided by its price, was 6.86 percent in the second quarter, the highest it has been since at least 1993, data from Standard & Poor’s show.
    Money managers often compare the yield on stocks and fixed income as a way to gauge the appeal of the two asset classes.
    Stocks ‘Attractive’
    "Stocks are attractive relative to any kind of bonds,"
    said Michael Mullaney, a portfolio manager at Fiduciary Trust Co. in Boston, where he helps oversee $9.5 billion.
    More U.S. executives than ever are increasing earnings forecasts compared with those lowering them, based on data Bloomberg began tracking in 1999.
    Shares of Teck Resources Ltd., which Notkin acquired in the third quarter of 2009, have climbed 72 percent since Sept. 30 of that year, Bloomberg data show. Vancouver-based Teck, Canada’s largest diversified mining company, was the fund’s 10th-biggest holding as of July 31.
    TRW Automotive Holdings Corp., another top 10 position for Notkin, has almost tripled in value over the same period. The Livonia, Michigan-based company is the world’s biggest supplier of vehicle-safety equipment.
    "We love the auto sector," said Notkin. The business will continue to grow globally, he said, and companies that sell safety and emissions gear will do especially well as governments around the world force carmakers to raise standards.
    Tech, Materials
    Notkin favors industries such as technology and materials that will benefit from expanding economies in emerging countries. Businesses that depend more on the U.S., including retailing and homebuilding, are less appealing to him.
    "We don’t see the domestic economy going gangbusters anytime soon," Notkin said.
    Leveraged loans are rated below investment grade and are repaid first in a bankruptcy or liquidation, which makes them a more defensive investment than high-yield bonds. Because the interest rates on the loans float, returns may rise if rates climb.
    Economists surveyed by Bloomberg expect the yield on the 10-year U.S. Treasury note to reach 3.3 percent by the fourth quarter of 2011. The S&P/LSTA U.S. Leveraged Loan 100 Index has returned 8.1 percent this year.
    Notkin said he is looking to add to his loan holdings, which represented 13 percent of the portfolio as of April 30, according to a filing with the U.S. Securities and Exchange Commission.
    "When rates rise, which will happen eventually, bank debt will look attractive and will outperform high yield at some point," he said.

  141. 141
    irongate Says:

    All i can say is thank goodness for the GM IPO… CNBS is so breathless for it that they are neglecting reporting on the most pertinent news of the week…. and that is that the Fed's plans are NOT working, (so far)

  142. 142
    zman Says:

    Was just about to ask JB what the $4.45 level signifies on his first chart for KOG. 

    re 139. Pretty much human nature. I got my start on the buy side and I'd give my orders to Bridge in St Louis and tell my guy to "work it all day". He comes back at 4:15 with a good fill, that was 3 or 4 cent business, a bad fill and it was 2 or 3 cent business. A partial fill and he knew the order might be gone for weeks. Human nature says fill it. 

  143. 143
    zman Says:

    re 141. LOL. 

  144. 144
    BirdsofpreyRcool Says:

    Ben is fighting the wrong battle.  But, that is what he does BEST.
     
    ugh.

  145. 145
    elijahwc Says:

    Just printed a ^ $6.00 on MHR.

  146. 146
    elijahwc Says:

    NTAP up $4.10 so what was yesterday about?  Machines, a coordinated raid, and political cover for it.  Hello SEC

  147. 147
    BirdsofpreyRcool Says:

    GST — update from Reef
     
    80% of 59k Marcellus acreage purchased is in Preston Co., W Va.  According to Reef, that is "high-grade 2nd tier land."  Also, company paid a lot less than $900/acre b/c they locked up the parcel last year.  They had a two vertical well drilling commitment, in return for that lock up.  And GST drilled those two wells, which IPd at 1.5 and 1.0mmcf/d.  Very good rates for verticals. 
     
    So, GST got the acreage at good prices and has already de-risked them with two vertical wells.  They will know in mid-December if Atinum will elect to opt into those acreas at the AMI price.  Either way, GST plans to drill a well on the acreage in early 2011… and they have enough cash and cash flow to do it themselves, if Atinum opts to pass (which I'm betting they don't).  Good stuff.

  148. 148
    zman Says:

    Preston is in the north, very good, thank you very much. Was concerned the low pricing had it mostly to the south, well out of the play down in Pendleton county.   So this buy buddies up with a lot of their existing leases. 

    http://geology.com/county-map/west-virginia.shtml

     

  149. 149
    zman Says:

    Thanks again, helps much, as its one of the ones in the morning post. 

  150. 150
    zman Says:

    Eli – if you like unrequited then you have to like mea culpa. Nice job on MHR. 

  151. 151
    zman Says:

    WFT worker killed by gunmen in Mexico. Another reason that country's production may falter will be the worsening security situation. 

  152. 152
    elijahwc Says:

    Thx Z
     
    MHR:  The rumored two deals in the hopper are now three.  Bakken for EFS swap with a non-operater Aussie ptnr.  MShale w/financially distressed  ajoining holder.  And, Utica Shale in Ohio.  I think the only one that might not happen is the first.
     
    More importantly above $5 is institution eligible which will help matters along.  Especially with a very aggresive drilling plan for '11.  Institutions still remember the last ride from 1 million  to 2.2 billion.  I certainly do.
     
    Now unrequited until $10.00

  153. 153
    zman Says:

    Interns have over run the office, early beerthirty. 

  154. 154
    bill Says:

    MHR star of the day
    Anyone know whats going on

  155. 155
    elijahwc Says:

    #154 I think the Stephens Cofab is partially responsible.  They have a differentiated smaller cap audience.  They rest is as Z would say "a hockey stick" production ramp coming.

  156. 156
    crysball Says:

    SSN…………Presentation at Annual Meeting
    http://www.samsonoilandgas.com/irm/Company/ShowPage.aspx?CPID=1206&EID=20993316
    Am surprised  they are not  in the Tyler Formation yet, as  they  like to be ahead  of  the power  curve  on leasehold………….perhaps  they  are  being quiet??????????

  157. 157
    bill Says:

    mhr 7 times avg daily volume, hmmmmmmmmm

  158. 158
    mimster90 Says:

    new LINE presentation

    http://files.shareholder.com/downloads/LINE/1070447166x0x420397/213D58D1-EA12-4F7A-AC12-C7FBFB114601/Dallas_Individual_Investor_Pres_WEB.pdf

  159. 159
    zman Says:

    Thanks, they speak tomorrow at RBC. Their exit rate for 2010 slipped higher again, was 300 two months ago, then 310 a month ago, now expecting it to be 320 MMcfepd. 

  160. 160
    bill Says:

    eog raised 1.5 b–
     
     
    Nov 18 (Reuters) – EOG Resources Inc (EOG.N) on Thursday
    sold $1.5 billion of senior unsecured notes in three parts,
    said IFR, a Thomson Reuters service.
    Bank of America Merrill Lynch, Barclays, Citi and JP Morgan
    were the active joint bookrunning managers for the sale.
    BORROWER: EOG RESOURCES INC
    TRANCHE 1
    AMT $350 MLN COUPON 3-MO-LIBOR MATURITY 2/3/2014
    + 75 BPS
    TYPE SR NTS ISS PRICE 100.00 FIRST PAY 2/3/2011
    MOODY'S A3 YIELD 3-MO-LIBOR SETTLEMENT 11/23/2010
    + 75 BPS
    S&P A-MINUS SPREAD 75 BPS PAY FREQ QUARTERLY
    FITCH N/A MORE THAN LIBOR NON-CALLABLE
    TRANCHE 2
    AMT $400 MLN COUPON 2.50 PCT MATURITY 2/1/2016
    TYPE SR NTS ISS PRICE 99.736 FIRST PAY 2/1/2011
    MOODY'S A3 YIELD 2.555 PCT SETTLEMENT 11/23/2010
    S&P A-MINUS SPREAD 105 BPS PAY FREQ SEMI-ANNUAL
    FITCH N/A MORE THAN TREAS MAKE-WHOLE CALL 20 BPS
    TRANCHE 3
    AMT $750 MLN COUPON 4.10 PCT MATURITY 2/1/2021
    TYPE SR NTS ISS PRICE 99.576 FIRST PAY 2/1/2011
    MOODY'S A3 YIELD 4.152 PCT SETTLEMENT 11/23/2010
    S&P A-MINUS SPREAD 125 BPS PAY FREQ SEMI-ANNUAL
    FITCH N/A MORE THAN TREAS MAKE-WHOLE CALL 25 BPS

  161. 161
    bill Says:

    exxi- maybe you have seen this
     
    speculates that exxi will buy sgy
     
    http://www.forbes.com/forbes/2010/1206/features-bp-john-schiller-energy-xxi-mexico-deep-man.html

  162. 162
    zman Says:

    GST – trading at $4.60, after hours, up 11%, on about 19K after hours volume

  163. 163
    BirdsofpreyRcool Says:

    GST — i think other people are FINALLY putting together the pieces here.  Of course, we are lucky enough to have Reef… who put together the sames pieces for us, but right after the actqn was announced.  Thanks, Reef!  Timing is everything.

  164. 164
    BirdsofpreyRcool Says:

    BedTime Market Strategist —
     
    Right Direction.
    It was an interesting day in the market. GM performed respectably in spite of all of the hype and fanfare in the marketplace that led to both the deal size and price being upped. One does have to appreciate the market irony, in that the Auto & Components Industry Group was the only one of the twenty-four Industry Groups to close in negative territory. Beyond the attention that GM received, we are encouraged by other developments that transpired today. There is nothing like a healthy corrective move in the market place to re-align sentiment. The Equity market pullback in the past week was duly noted in the AAII Sentiment figures. Sentiment dropped to 55.17% bullish via our calculation method (Bulls/(Bulls+Bears). That is the lowest reading since the 42% bullish reading posted in the first week of September following the sloppy sell off at the end of August. Although 55.17% bullish only puts sentiment squarely back in neutral territory, considering 8 of the last 9 weeks have posted readings above 60% bullish it is a welcome development. It is also a positive to see a pullback from the 70% sell signal reading registered in the last week of October. Our favorite fundamental indicator, Initial Jobless Claims continues to begrudgingly show improvement. Specifically, 3 of the last 4 weeks are 3 of 4 best readings in 2010. It still appears these numbers should be on track to break below 400,000 before year end. Finally, there was that impressive Philly Fed number which is its best reading of 2010 and matches the recovery peak registered in December of last year. Another important aspect of this report being so strong is it helps to nullify concerns about the abysmal Empire State Manufacturing report from earlier in the week. It is also worth highlighting the Employment Component of the Philly Fed posted its highest reading in over 3 years, another welcome development.

  165. 165
    West Says:

    MHR………..Agree with Eli here on the purchase of distressed assets in WV and in Ohio. This whole area is ripe for consolidation and with no previous high pressure pipeline capacity for Marcellus gas , a large portion of the area is HBP by low volume stripper gas wells that are not profittable at current gas prices. Operators are cash strapped and I would expect MHR to continue to pick up these properties at relatively low prices .Looking at the map on their recent November presentation , the Ohio farmout may be 20,000 plus acres …… MHR may also have been the high bidder for British energy company Melrose Resources' Permian Basin assets. These would include waterflood properties in Lea and Eddy Cos, NM and the Westbrook field in Mitchell Co., TX.  The New Mexico properties are old and have some enviromental issues but nothing that they would not be able to resolve ………………………………..Little Sundance Energy (SDCJF.PK) just recompleted 2 horizontal wells in the Wattenberg field in DJ Basin of CO in 3 zones "J", Codell and Niobrara that IPed for 290 and 184 boepd. Not bad for a company that was making about 700 boepd at the end of the 3rd quarter. With their recent stock placement and proceed of 17mil$ they intend to use about 3mil for additional land deals without specifically mentioning any locations…………………………………..Permian Basin…The Basin that cried Wolf….With the Railroad Commission routinely approving comingling of mutliple reserviors the science experiment is in full gear. Local Midland company Concho, CXO, is working 3,000 foot interval from Wolfcamp down to the Ellenburger on eastern edge of Midland Basin.So here are some of the fun names: Wolfberry, Wolfcline, Strawberry, Tokawolf, Wolf-fussel, Wolf-ford, Wolfburger .  The hottest part of this play continues to be north of Midland in Midland , Martin and Andrews Counties with a lot of these wells IPing for in excess of 400 boepd  from vertical wells . Public companies that are active in this portion of the play CXO, PXD, CWEI, LINE, GPOR, and EGN. Private operators that are also active include Faskin Oil and Ranch ( from original land grant from TPRR), Henry Resources, Patriot Resources (recent 150mil$ line) and EXL ( ex Henry Petroleum exe). Probably just another good reason to own LINE on any pullback, besides the Granite Wash.

  166. 166
    elijahwc Says:

    Bill #161 what a wonderful find on EXXI.  Outragously good article.  Also, now we know why Shiller needed the compensation package:  lol
     
    "On a warm evening in early November executives of Energy XXI are unwinding with scotch and cigars in an ultramodern granite-and-leather lounge at their Houston headquarters. Lagavulin and Davidoff in hand, Chief Executive John Schiller slides open a glass wall, transforming the room into an open-air patio 29 stories above downtown.  Schiller is feeling flush these days,…."
    He does drink the finest of scotchs.  Dark smoky peat at about $90+.  The cigar although good is mild by comparison. 
    Here is a repeat of the link:  Must read for EXXI MMR FCX holders.  Thx Bill
    http://www.forbes.com/forbes/2010/1206/features-bp-john-schiller-energy-xxi-mexico-deep-man.html 
     
     
     

  167. 167
    full report Says:

    full report

    Thursday – Oil Review Plus Natural Gas Preview Plus Parade of Midgets | Zman's Energy Brain ~ oil, gas, stocks, etc…

  168. 168
    Kirnos.Net Says:

    Kirnos.Net

    Thursday – Oil Review Plus Natural Gas Preview Plus Parade of Midgets | Zman's Energy Brain ~ oil, gas, stocks, etc…

Leave a Reply

Zman's Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®