23
Nov

Turkey Of A Different Feather Tuesday

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Market Sentiment Watch:  North Korea shells South Korea. Futures fall. This comes two days after the the envoy to North Korea downplayed that country's revelation that it has a new uranium upgrading facility and a lot more centrifuges than the world thought. The U.N. has been utterly useless in reining these turkeys in. In the words of Elvis I'd like to see "a little less conversation, a little more action please".  This news at least temporarily disrupts what should have been another strong day for the Bakken players after HES acquired another billion dollars worth of leases (see Stuff section below). 

Salazar Watch: Ken Salazar, who seems to suffer from an overdose of triptophan when it comes to getting permits issued in a post Moratorium world, continued to stall and hedge as he met with Gulf State Lawyers yesterday.

Ecodata Watch:

  • 3Q GDP revision is due at 8:30 am EST, forecast = 2.4% vs the initial read of 2.0%
  • We get existing home sales at 10 am EST, forecast = 4.45 mm.
  • We get FOMC minutes at 2 pm EST


In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – HES & the Bakken Players, The Mid Cap Orange Charts
  4. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $5,000
    • 99% Cash
    • Yesterday’s Trades:
      • None
  • ZIM (Zman Inefficient Markets portfolio)
    • $10,600
    • 17% Cash
    • Yesterday’s Trades:
      • EXXI – Added (20) December $30 calls for $0.65, on the mid with the stock at about $26. See today's post for news on EXXI's acquisition of a package of Shelf assets. 
      • MMR – Added (20) MMR December $20 calls for $0.62, on the mid with the stock at $17.20. Expecting news in the next couple of weeks on one of their ultra deep prospects in the Gulf of Mexico Shelf. 
      • EXXI – Added (20) more of the $30 December calls for $0.40 with the stock backing off to just under $25 with the market on its lows. 

Commodity Watch

Crude oil closed off $0.24 at $81.74 yesterday in listless, boring trading. Today promises a little more enthusiasm surrounding the GDP revision. This morning crude is trading off a buck with equity futures. 

Natural gas rallied another 11 cents to close at $4.27 yesterday as the market anticipates the first withdrawal of the season. Yawn. We are range bound. This morning gas is trading off almost a dime. 

Stuff We Care About Today 

Mid Cap E&P Orange Charts

Notes:

  • CLR, DNR, NFX, and PXD now topping $10 B in TEV, I'm considering moving my range for mid caps $5 to $15 B as so many names have swollen into the lower end of the range for the large caps.  
  • I left EXXI in the small cap group for now, look for that group to be out next week. 
  • The Large and Mid Cap Orange Charts have been placed in their respective tabs at upper left
  • For the most part, as you would expect the once gassy dominated mid caps are getting oilier in a hurry. 
  • Valuations are what I'd call fair to the upper end of fair for the mid caps. XEC and NFX remain bargains as I see things. PXP seems cheap for a reason as they chase what works for others. 
  • On reserves valuation, look for the high growth names like HK to beat their $ / Mcfe multiple down substantially just after year end. 
  • Note that PXD has vastly outperformed almost all of the midcaps this year due to their ramping activity in the Permian. Also note that while CLR has grown Bakken production it's high valuation inhibited the stock all year long. 

HES Buys $1 Billion Worth Of Bakken Acreage

  • HES paying $1.05 B for 167,000 acres from private player TRZ Energy LLC
  • On an acres only basis this would be $6,287 per acre.
  • The properties however come with 4,400 BOEpd of current production.
    • If we put them down at $50,000 per flowing BOE that leaves ...
    • The acreage valued at just under $5,000 /ac 
    • Also, this is a little better price than HES's move on AEZ acreage a few months back at $5,500
  • The properties are near some HES' current acreage east of the Nesson. 

For Reference, Here's A Bakken Players Table Update ~ not everyone, just my primary names. 

 

 

Other Stuff 

  • Thought of the day ... CHK said they have 100,000 acres in the play and said they were looking at things differently that other players here ... they would not commit to looking at the Bakken or the Three Forks. Could CHK be looking at the Tyler Formation? Hmmm. Will be looking at permits. 

Odds & Ends 

Analyst Watch:

  • HSBC cuts targets on solars YGE ($9.70 to $8.10 and Underweight) and STP ($9.60 to $8.50 and Neutral).


97 Responses to “Turkey Of A Different Feather Tuesday”

  1. 1
    zman Says:

    3Q GDP revision = 2.5%

  2. 2
    zman Says:

    Another aptly named single digit midget, drilling a successful well with HK in its namesake play. EFRDF on the tape saying it has completed an Eagle Ford well (but giving no real results) and using the most blatant case of ticker spam I can recall in some time to promote the stock (sidewall cores sent to WFT and CLB, sleeve from BHI, and they are near an HK well). The stock has been running, I have not looked at the balance sheet but that kind of pr is the kind of hypey, promotion stuff I shy away from as usually there is lots of noise and nothing behind it. Will add it to the list of SDM's.  

  3. 3
    zman Says:

    Analyst Watch:

    OAS – Tudor Pickering upgrades to Accumulate. Little late fellas. 

  4. 4
    milepost_43 Says:

    Nat Gas shut ins begin in Canada….. —

    ConocoPhillips Canada / Shutting-in Cdn Gas Production & Laying-Off Employees… according to the Calgary Herald, ConocoPhillips Canada confirmed yesterday that it’s laying off western Canadian staff this week (no disclosure on the exact number) and will shut-in 28,000 boe/d of natural gas production (~15% of total western Cdn gas production) due to weak gas prices; Conoco spokesman Rob Evans said, "I can confirm that we did inform our western Canadian gas employees that there will be layoffs this week. That went out this morning. Out of respect for the employees we're not providing any more detail until we can get more information to them". http://www.calgaryherald.com/business/energy-resources/ConocoPhillips+laying+staff/3867780/story.html

  5. 5
    bill Says:

    3.  Something is amiss at tph.
    PXp shows up well on your charts. They should have some news on the deep water gom divestiture soon

  6. 6
    zman Says:

    re 4 – to clarify, that would 15% of their production there, not WCSB (Western Canada Sedimentary Basin) production which is over 12 Bcfgpd. 28,000 BOEpd is 168 MMcfepd or less that 0.2 Bcfpgd. So its a start but not a big deal in and of itself. 

  7. 7
    zman Says:

    Bill – guessing they were 13th man on the OAS deal team, lol. 

  8. 8
    BirdsofpreyRcool Says:

    Morning summary from Madison Wms —
     
    MADISON WILLIAMSBakken Shale– HES buys 167knet acres in the play in ND from TRZ Energy, an Encap backed co, for $1.05bn in cash. Current prod is 4400b/d. Metrics $6300/acre or $238k/ flowing boe/d or assume $100k/ flowing boe/d would put acreage at $4k/acre. GEOI assuming these metrics would value their Bakken at $12-17/share.  That would leave the rest for their Chalk/EFS which accts for 2/3rds of their current prod or $10/share…. NOV– with PBR announcing the final shipyards for their 28rig tender, positive for NOV and their Rig Tech business.  Assume PBR awards 25% every 6mos and NOV would receive 60% of the business or 16rigs. At $225mm/package everyone should generate approx 10c to eps…. SHALE GAS in the spotlight again as CNBC is premiering the documentary HANYESVILLE tonight at 9pm EST

  9. 9
    BirdsofpreyRcool Says:

    Bakken Summary from Bloomberg —
     
    Hess Buys 167k Acres in Bakken for $1.05b; Watch BEXP, OAS 8:59
    Hess agreed last night to buy 167k net acres in Bakken shale from privately-held TRZ Energy for $1.05b cash; expected to close by year-end.
    UBS calls price ~$4,500/acre (adjusted for 4.4mboe/d of production) "attractive" vs recent deals in $5,500-$6,500/acre range; raises HES 2011 production growth est. to 4.5% from 3.4% Tudor Pickering says Bakken doesn’t end at N. Dak. border, sees activity in eastern Montana; upgrades OAS to accumulate from hold, reiterates CLR at accumulate, says buy BEXP Other E&Ps w/ Bakken exposure include: DNR, CXO, SM, ROSE, NOG, WLL, EOG, KOG
    NOTE: HES agreed to buy AEZ in late July, paid ~$5k/acre for AEZ’s Bakken acreage; UBS says HES has increased Bakken acreage by more than 50% to 752k net acres since 2Q; AEZ special meeting set for Dec. 17

  10. 10
    blackgold39 Says:

    Nice note BOP, will be watching that special

  11. 11
    zman Says:

    UBS should note that its east and north of the Nesson, not where the really big wells have been of late, which reduces the price. 

  12. 12
    elijahwc Says:

    Rodman bumping EXXI:
    "Raising estimates. The deal is highly accretive to our estimates. Our
    F2011 and F2012 CFPS estimates increase to $5.97 (from $4.11) and
    $8.06 (from $4.57).

    Increasing target price to $33; reiterate Market Outperform. Our
    target price rises to $33 (from $27) on the accretive deal. As we said
    before, we like the deal as it gives EXXI additional free cash flow
    and an expanded opportunity set. Additionally, it puts the company in
    a strong position to be a further consolidator of the Shelf. We're
    still buyers of the stock as we see 25%-30% upside from current
    levels. 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 prices of $80/Bbl and $6.00/Mcf."

  13. 13
    ram Says:

    I thought military skirmishes excited oil?

  14. 14
    zman Says:

    Re 12 – thanks  easy to be accretive when you pay cash but first idea of the jump in CFPS I have seen thrown out by the Street. Those are decent increases but the 2011 number still looks pretty conservative. 

  15. 15
    ram Says:

    With the additional Bakken purchase by HES, is their any idea of what percent is left unpurchased?  Ase we close to bidding wars?

  16. 16
    zman Says:

    Ram – depends on where they are and if they result in actual war. Here they seem to just be causing equities to fall and the dollar to spike which tanks oil. 

  17. 17
    zman Says:

    15 – its gotten tighter, still acreage tracts available but they are getting more unconsolidated. We are already in the bidding war stage. 

  18. 18
    ram Says:

    Thanks zman, good morning.

  19. 19
    zman Says:

    Across the board drops in oil and gassy stocks on basically no volume. Going to add some more opportunity calls soon. 

  20. 20
    zman Says:

    Good morning Ram, hopefully you are far from the shelling. 

  21. 21
    BirdsofpreyRcool Says:

    Rhetorical question…. what the HECK is North Korea thinking???

  22. 22
    zman Says:

    Maybe it was an early birthday present for the protege. He likes fights, heavy drinking and never admits that he's wrong. What more could a boy like that want than a little war.  Doesn't the CIA have wet teams for this kind of guy?

  23. 23
    BirdsofpreyRcool Says:

    A few levels from Bloomberg Technical Analyst from earlier this morning —
     
    S&P Technicals: Futures Much Weaker Ahead of Open 8:12 [SPY US 120.19, -0.10]
    S&P futures -13 to 1185, weighed down by a North and South Korean incident, as well as continued concerns about the Irish debt situation.
    Asian markets were lower; Hong Kong -2.7%, Shanghai -2%, South Korea -0.8%, Taiwan -0.6%.
    European markets weak; Spain -2.2%, Italy -1.4%, France – 1.3%, UK -0.9% In Monday’s trade the S&P fell as low as 1185, but staged a strong rally in the afternoon, closing again just shy of 1200 resistance.
    Today’s S&P key trading levels:
    Resistance
    1220 (L-T resistance – April High)
    1200 (S-T resistance – round figure, 11/18 high, 11/19 high/close)
    1199 (S-T resistance 10-DMA 11/12 close, 11/22 high)
    1198 (S-T resistance – 20-DMA, 11/3 High/Close, 11/4 lows, 11/15 close, 11/22 close) 1190 (L-T resistance 200-week moving average, 10/28 highs) Support
    1185 (S-T support – 11/22 low)
    1184-1181 (multiple S-T support)
    1178 (S-T support – 10/13 close, 10/14 highs, 10/19 highs, 10/20 close, 10/26 lows, 11/1 lows, 11/16 close)
    1176 (L-T support, 1-yr. 76.4% Fibonacci retracement, 11/17 low)
    1172 (L-T support – 50-DMA, 10/27 intraday low)

  24. 24
    zman Says:

    ZTRADE – ZIM – MMR

    MMR – Added (10) more MMR $18 December calls for $0.64, on the mid, with the stock at $16.40. Expecting news on their ultra deep activities within the next week or two. 

  25. 25
    zman Says:

    ZTRADE – ZIM – WLL

    WLL – Added (5) more WLL December $115 calls for $1.45, on the mid, with the stock at $108.40. Expecting news here in the next week to 10 days.  

  26. 26
    zman Says:

    OAS and EXXI spots of green in a mostly red sea of energy stocks. 

    S&P trading sideways. Volumes pretty low considering the overnight NK related panic. 

  27. 27
    zman Says:

    GM – wow, what follow through that one has had. 😉

  28. 28
    ram Says:

    Re 20.  Yes, but it's tough to look like an American sometimes.

  29. 29
    zman Says:

    WLL down $2 on 50,000 shares 30 minutes after the market open. Computers playing ping pong today.

  30. 30
    zman Says:

    re 28. Not if you have one of our "made in the USA – Got Bakken?" T's on. 

  31. 31
    Zorgnak Says:

    Thinking 1177 should do it for the S&P Futures

  32. 32
    zman Says:

    Thanks Zorg. 

  33. 33
    BirdsofpreyRcool Says:

    Credit market indices indicating that there is more hurt to come in equities…. use any significant weakness to scoop up a few of your faves.

  34. 34
    zman Says:

    By the way, if you want to see where those leases HES bought are you can see a presentation from that private firm here. 

    http://www.spegcs.org/attachments/studygroups/2/2009_09_Bus%20Dev%20-%20Tracker%20Jeff%20Vaughan.pdf

    Pretty interesting if a bot dated presentation by a private. 

  35. 35
    Zorgnak Says:

    Seeing 1st  upside target in the S&P @ 1185-86
     

  36. 36
    ram Says:

    How did that part of the world (bakken) become blessed with that type of shale composition? 

  37. 37
    ram Says:

    Apparently Mountrail is the best "oreo".  Is that where BEXP gets the best rates?

  38. 38
    jiveyjr Says:

    BOP; bless your little heart for KOG…wotta stock…thk you Z for making sense of it with your analysis

  39. 39
    ram Says:

    Where do you believe Jimmy Hoffa is hiding?

  40. 40
    zman Says:

    BEXP – No, their best stuff is west of the Nesson Anticline

    Starting on about slide 8 this should answer #36

    http://energy.usgs.gov/flash/Bakken_slideshow.swf

  41. 41
    zman Says:

    Jivey – ditto your BOP comment.

    re 39. Check the archives here:

    http://www.drudgereport.com/

  42. 42
    ram Says:

    Thanks. I would have never of guessed Myrtle Beach.

  43. 43
    zman Says:

    re 42. Winethirty must have come early. 

  44. 44
    ram Says:

    Fortunately, I'm 7 hours ahead of you.

  45. 45
    zman Says:

    re 44. Great, please let me know what the stocks closed at today. 

  46. 46
    zman Says:

    KOG – Pretty sizable volume for the time of day and considering the approaching holiday. Now at 800K traded on this break out in the chart. Just about has to be due to takeover speculation attributable to the HES buy. I would say that goes for OAS and BEXP even more as you look at their now discounted $/ac in the table in the post. 

  47. 47
    zman Says:

    Analyst Watch:

    EXXI – Pritchard upgrades to Buy, says "Gotta Like This Deal"

  48. 48
    zman Says:

    re 47. Their PT is $30. 

  49. 49
    tomdavis12 Says:

    BOP: If you can share any Duane comments re EXXI, that would be great. Thanks.

  50. 50
    ram Says:

    Oh, I get it. Yuk yuk.

  51. 51
    ram Says:

    RE 40 – The San Joaquin and Sacramento basin is mentioned in California.  I thought the Monterey basin is also known and defined.

  52. 52
    zman Says:

    re 51. Yes, it is. Not sure I understand if there is a question there. 

  53. 53
    ram Says:

    I did not see the Monterey basin listed in the USGS report. 

  54. 54
    zman Says:

    I think they are calling it the LA Basin. You don't see Haynesville on their either, its under the broad Acoma basin

  55. 55
    zman Says:

    EOG getting hit a bit overmuch today, wondering if they are being rumored to be an acquirer in the Bakken. I personally don't see it happening but that doesn't mean they won't as they have made some somewhat surprising balance sheet moves there of late. 

  56. 56
    zman Says:

    Off to the DMV for some much needed excitement. Back in an hour.

  57. 57
    zman Says:

    Back early, the DMV was dead too. Market not doing much. Doing some reading.

  58. 58
    BirdsofpreyRcool Says:

    jivey — thanks for #38… so glad to have it work for people.  And great work, z, on 'splaining the value proposition at KOG.

  59. 59
    jiveyjr Says:

    re: 58….yea and I increased my position size 20% yesterday…so I'm really happy!

  60. 60
    BirdsofpreyRcool Says:

    CIGX — sideshow to the main reason for owning the stock… they are set to start their appeal trial against RJReynolds on Jan 11th.  This used to be the reason people held the stock.  Now it's just another way the stock could go up. 
     
    Back to All Energy, All the Time.

  61. 61
    ram Says:

    OT – CIGX: It seems the only people benefiting from litigation is lawyers.

  62. 62
    irongate Says:

    BOP… wow… i had no idea CIGS was still fighting that battle…    I went thru 2 rounds with garbage er um Garbis… it is basically on my banned list forever.  Actually quite surprised that CIGS still even has value.   when I got involved there were just over 50mln shs outstanding… I bet there's double that amount these days.    These days I am on the TIVO bandwagon..   just waiting on DISH to lose their enbanc appeal..    I figure TIVO has potentially 3 points down and 12 points up… nice risk for an options trade out to Feb.
    back ON Topic…   regarding MMR and EXXI…  does MMR own a stake in EXXI?  or are they just drilling partners.. 

  63. 63
    zman Says:

    IG – Working interest partners as far as I know. 

  64. 64
    BirdsofpreyRcool Says:

    IG — they think they can win it… seeing the same Court of Appeals who wrote a unanimous (and scathing) rejection of the first Garbis decision.  Speaking of which, would sure like to know the REAL story behind the Garbage Debacle.  Someone just had to have some pretty spicy pictures, is all I can fathom. 

  65. 65
    BirdsofpreyRcool Says:

    IG — OT… it's funny… i woke up this morning thinking about TiVo… and if it had any value.  I missed the NetFlix run and I find that highly irritating!

  66. 66
    zman Says:

    CNBC – "Fed minutes show serious disagreement about monetary easing"

  67. 67
    tomdavis12 Says:

    What was the rational for the XOM sale to EXXI from their point of view. With 61% oil production, isn't that what everyone wants including XOM? 

  68. 68
    zman Says:

    Little stuff either taking a turn or at worst getting ignored. CXPO in the green, impressive after the move it has had the last two weeks. We should get some more data there around the end of this month (middle Bossier), then around year end on their first Eagle Ford well. If that takes it to $4+ I plan to leave and wait out the inevitable decline. 

  69. 69
    zman Says:

    Tom – From XOM's standpoint, it's a hassle dealing with targets that for them are small and inconsequential to either the reserve report or production (yet are big to a smaller player like EXXI). XOM would rather hunt in either the deepwater in the Gulf or in the Bakken which they view as a pure resource play with no exploratory risk involved (apply capital and watch it grow) or internationally where the targets are bigger and there is no Salazar. Many little E&Ps have done well by taking XOM's often budget starved crumbs by adding fresh thinking and capital. 

  70. 70
    RMD Says:

    RRC's Pinkerton told visitor recently he thinks OPEC wants to move oil price higher as economies improve, mentioned $200.

  71. 71
    zman Says:

    RMD – Here's a big "well duh" to Pinkerton. A blindingly obvious statement on his part. The $200 without a time frame is pretty easy too. 

  72. 72
    zman Says:

    We do have more energy conferences next week including a personal favorite, the Jefco Global Energy Conference. 

  73. 73
    irongate Says:

    WPRT- i know a few guys follow this one here…   CNBS just announced that the CEO will be on cramers show tonite.  fwiw

  74. 74
    zman Says:

    Ha, it's probably worth about $1, thanks. Probably $1 quick buck at that, lol. 

  75. 75
    elduque Says:

    HI Z- can I go out and play???

  76. 76
    zman Says:

    Only if you promise to tip one back for me at Duke's.

  77. 77
    Zorgnak Says:

    Re 73
    Thanks Iron…

  78. 78
    zman Says:

    MMR special shareholders meeting for approval of the PXP shallow water acquisition set for Dec 30. in NOLA. Sounds like I know what I'm doing for New Year's Eve. 

  79. 79
    mimster90 Says:

    If all week going to be like today I will need to get something to drink.

  80. 80
    zman Says:

    re 79, I suggest coffee.

    GM down 2% … are they still hyping it on CNBC?

    We get both oil and natural gas inventories tomorrow. Oil looking for down across the board results on stocks, natural gas is seen down 2 Bcf. 

  81. 81
    irongate Says:

    MMR – I am not sure if any of you guys have posted this yet, if so I apologize…. but I hear  that Blackbeard is at 24,300 fet as of yesterday
     

  82. 82
    zman Says:

    IG – yes but that should be Davy Jone #2.

    From yesterday's comment section:

    "Blackbeard East – at 28,500', about to log to that point (picking up tools now), then will drill to TD (originally set for 29,500 but it will go lower)"

    Thanks for checking as it doesn't hurt to make sure bases are covered. Schiller indicated yesterday that we are days away from logs at Blackbeard East. 

  83. 83
    irongate Says:

    thanks zman!

  84. 84
    cargocult Says:

    Bill-any idea why NM is dropping?

  85. 85
    elijahwc Says:

     
    http://www.forbes.com/forbes/2010/1206/features-bp-john-schiller-energy-xxi-mexico-deep-man.html
     
     
    IG: MMR & EXXI
     
     
    Ownership interest or working interest, they might as well be joined at the hip.

  86. 86
    elijahwc Says:

    Pati.  You smiling?

  87. 87
    choices Says:

    FWIW category:
    http://www.zerohedge.com/article/dropping-vix-masking-rising-fear-most-other-asset-classes-and-does-hedge-fund-spy-pair-hedgi

  88. 88
    Pati Says:

    Yes.  Unfortunately sold half yesterday at close.

  89. 89
    RMD Says:

    Z   in your web hosting , web development travels did you ever run into or try any of Imergent's products like StoresOnline or their web hosting?  (Just heard a story on the co.)  Thanks, I guess there a re millions of similar co.s in the market.

  90. 90
    zman Says:

    RMD – I did not, who do you ask?

  91. 91
    Pati Says:

    #86, Eli, did you go yesterday? 

  92. 92
    elijahwc Says:

    #88 Nothing wrong with that.  You are now are on the house's money.  Congrats on a plan well traded.

  93. 93
    Pati Says:

    Thank you. 

  94. 94
    zman Says:

    beerthirty

  95. 95
    elijahwc Says:

    Pati no I have not.  FTK is an investment and I'm prepared for the agony of the pullback.  And it will come.

  96. 96
    zman Says:

    SSN on the tape with delayed completions in the Bakken.

  97. 97
    RMD Says:

    SSN's problems look like standard SDM issues, just a problem "getting it done".

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