30
Nov
Tuesday Morning – Natural Gas Supply Slide Show Plus Other Stuff
Market Sentiment Watch: As expected, news flow from energy land increased with onset of a fresh investor conference season. I expect to be on a number of calls today and will update the Catalyst List for the beginning of the week as items get marked off. Equity futures are trading off this morning again on European debt fears but I expect the oilier E&Ps to continue to outperform both the group and the market in the near term. The gas supply figures released yesterday were abysmal and are covered in detail below in the Natural Gas Slide Show.
Ecodata Watch:
- Case-Shiller home prices,
- Chicago PMI (F = 59.8%),
- Consumer Confidence (F = 52),
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Natural Gas Supply Review - Bearish
- Stuff We Care About Today – OAS, CRZO
- Odds & Ends
Holdings Watch:
- ZCAT (Zman Catalyst portfolio):
- $5,200
- 99% Cash
- Yesterday’s Trades:
- None
- ZIM (Zman Inefficient Markets portfolio)
- $7,900
- 4% Cash
- Yesterday’s Trades:
- None
- Positions page will be updated later this morning
Commodity Watch
Crude oil rallied $1.97 to close at $85.73 yesterday despite weaker equity markets on expectations that demand from Asia will remain strong. This morning crude is trading off $0.65.
- Early Read on Oil Inventories:
- Crude: DOWN 0.9 mm barrels
- Gasoline: UP 0.750 mm barrels
- Distillates: DOWN 1.1 mm barrels
Natural gas tumbled $0.19 to close at $4.21 yesterday after the EIA reported another rise in production (see next section for details and graphs). This morning gas is trading off 2 pennies.
- Tropics Watch: End of the official Hurricane season is today ... went out with a whimper. ---
Natural Gas Supply Slide Show - Updated for the Month of September 2010
It's a no brainer to call this report bearish:
- Lower 48 Gas production was up 0.4 Bcfgpd from August to 62.2 Bcfgpd, not great.
- Flat TX, OK, NM, WY, down Gulf but up in the "other states" category (Marcellus, Fayetteville most likely culprits but EIA still not breaking out the new rising star production states – probably takes them a couple more years to break out PA and WV and maybe AR and CO).
- Some recent Street comments were yet again looking to call the top. For my own part I was expecting flattish numbers.
- I think near term thoughts of a rollover are premature given the drilling we've seen, the public company results year to date, and the giant backlog of wells that have been drilled but not yet completed in the rush to hold acreage pre lease expiry.
Stuff We Care About Today
OAS Adds Montana Williston Acreage
- 10,000 acres with 200 BOEpd of production on it located in Richland County, MT
- This builds upon the Montana acreage position added earlier this month. In early November the acquired the Hebron area acreage, in southern Roosevelt County - 16,700 acres, for about $2,875 per acre before considering production.
- This new acreage is contiguous to the south in Richland with Hebron
- And their total Williston Basin position to 318,000 net acres
- Purchase price of $30 mm, or $3,000 per acre ... this would be pretty heady pricing for what until recently has been frontier territory however if you put $50,000 per flow barrel on the production you arrive at a more reasonable $2,000
- The company still has no debt and cash on the balance sheet should still be nearly $250 mm.
- Nutshell: OAS is moving west in the Bakken play along with the others and it makes sense for them to continue to push the into cheaper areas that may ultimately results in Bakken Core like results. It also may tell you something about how they feel about their Beula Irene well, their 3rd well in the area, last listed as awaiting completion in central Roosevelt County as well as the first two wells here which were impressive. Also note the interesting comment about this area being prospective for the same kinds of EURs seen in their West Williston drilling (450 to 787 MBOE range). The name still trades at a steep discount to its peers on a TEV / Acre basis as seen in the graph below (please note that this is not a fair comparison to CLR and WLL who have other non Williston core areas that skew their TEV/Acre higher in the graph).
- I continue to own a half sized position in the name having taken profits twice now since my soon after IPO entry here.
CRZO Operations Update:
- Eagle Ford Shale - strong results
- 1st well, the Mumme Ranch 10 Hin La Salle County, TX - IP of 1,011 Bopd
- 2nd well, the Mumme Ranch 12 H - IP 1,220 Bopd
- They are saying production from the two wells has stabilized at a combined 1,125
- 2 MMcfgpd is being flared from this two well pad
- Very impressive result
- La Salle is on the west side of the play, in APC/SFY/HK territory
- 75% NRI to CRZO
- A third well has been fracced and we should get results before year end; two other wells have been drilled but not completed
- CRZO holds 20,000 net acres in the Eagle Ford
- Niobrara Shale Update - results just around the corner
- First well schedule to frac tomorrow in Weld County, CO
- A second well is drilling in the horizontal section and a third well will spud immediately following TD of the 2nd one.
- CRZO holds 59,000 net acres in the Niobrara
- Nutshell: This is a name I have not played in but am generally on for the conference calls. Until recently it was a Barnett-centric gas player but that has changed over the course of the last several quarters with the addition of positions in the Eagle Ford, Niobrara, and Marcellus. Management has commented about potentially adding 5,000 Bopd by the end of 2011 from the EFS and Niobrara ... this is a good start. The stock is trading at 8x this year (on the high end for the growthy E&Ps but only 5.0x next years CFPS Street estimates. Given these results, more of the crowd following them should gain confidence in that 5,000 bopd potential wedge. I'll be watching it today for a quick trade higher on the news and in anticipation of further news in both plays and from the Marcellus by year end.
Other Stuff
Canaccord Energy Conference (all times EST)
- NOG - 8:20 am
- AXAS - 8:40 am
EXXI Announces $700 mm senior notes deal to fund recent acquisition.
EGY - Catalyst List event: EGY – I have note calling for South Tchibala well expected to come on this quarter at about 2,000 boepd, on the tape at 3,800 bopd.
Comments for GDP have been deferred until tomorrow's post.
Odds & Ends
Analyst Watch:
- CHK - Argus cuts to Sell from Hold
ATPG out with a new presentation posted;
November 30th, 2010 at 8:54 amhttp://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA1OTEzfENoaWxkSUQ9NDE0ODY1fFR5cGU9MQ==&t=1
test
November 30th, 2010 at 9:30 amCRZO barely budging out of the gate due to the market.
November 30th, 2010 at 9:30 amSee you john, had to step out for a few there.
November 30th, 2010 at 9:30 amAnalyst Watch:
CRZO – Howard Weil ups their target from $29 to $35
November 30th, 2010 at 9:31 amFreaky opening in WLL, down to $105 and back.
November 30th, 2010 at 9:33 amGlobal Hunter took CRZO target to $45
November 30th, 2010 at 9:33 amTGA….Jarislowsky, Fraser Limited ups target price to $C19 from $C15..no link….Canaccord also @ $C19…..Canaccord conf presentation today @ 1:20 MST
November 30th, 2010 at 9:38 amre chk and argus, do you know why they went to sell?
November 30th, 2010 at 9:43 amThanks MP – plan to be on that one.
Just watching CRZO trade barely positive on what TPH is calling "some of the best results we've seen in the EFS". Their estimates and PT's are rapidly going to go up. Stock flat due to the nature of the day. I've been watching there for awhile now, wanting to see a pullback and not getting it…had hoped it would fill a gap from earlier this month but no joy on that so far.
November 30th, 2010 at 9:45 amre 9 – No. I would bet it was a combination of yesterday's EIA data and the buy of more acreage they announced.
November 30th, 2010 at 9:46 amRE Natural Gas Slides:
November 30th, 2010 at 9:46 amZ, my thoughts on New Mexico: We'll see an upward growth in gas production as you see people chase the Leonard/Avalon/Bone Springs Shale. Majority of the activity for these shales are in New Mexico.
As for Louisiana production, expect another huge year of growth. People are skeptical since rig counts have dropped from their highs, but there are hundreds of wells that are still waiting to be fracced.
Just my $.02
#9 from breifing:
Chesapeake Energy downgraded to Sell at Argus (22.05)
Argus downgrades CHK to Sell from Hold saying while they believe Chesapeake
November 30th, 2010 at 9:50 amhas one of the industry's best collections of natural gas assets, they are
concerned about the company's profligate spending and its impact on the
balance sheet, as well as worries about its earnings quality.
Thanks Tex, my thought is that the LA growth is slowing with a combination of less drilling and restricted choke production. But I absolutely hear ya on the uncompleted well list. I just don't think 2011 looks like 2009 and 2010 in continuing the hockey stick.
Hear ya on NM, same could be said of OK and the Washes
November 30th, 2010 at 9:51 amChicago PMI up more than expected at 62.5
November 30th, 2010 at 9:54 amCRZO Volume Profile…Little resistance until $34- $35
November 30th, 2010 at 9:55 amhttp://www.charthub.com/images/2010/11/30/AREX
Missed a shot at a low ball offer on the CRZO $30s. Being patient.
November 30th, 2010 at 9:55 amLong CRZO
November 30th, 2010 at 9:56 amThanks ZORG
November 30th, 2010 at 9:57 amdoes anyone have access to argus sell on chk
"company's profligate spending"
Aubrey went thru great detail showing how the jv partners end up paying for the acreage
Take, efs..they bot yesterday at 9,000 acre and sold 20 % to cnoc at 10.800
I can see if they said surplus of ng and low prices lasting forever but that would affect all ng producers not just chk and i thought chk was getting oilier
November 30th, 2010 at 9:58 amexxi out with a note offering to pay for the xom assets
November 30th, 2010 at 10:03 amThe stock is down hard. Do note buyers short the common?
Where is CRZO in EFS relative to CHK?
November 30th, 2010 at 10:11 amNote buyers do no such thing (that I know of). They want the equity to go UP (as it provides more cushion for bondholders). On the other hand, if you push equity down before a note placement, maybe you get better pricing? That is not a game traditional investors play… but maybe there is a Level in Hedge Fund Hell that plays that way.
November 30th, 2010 at 10:14 amEXXI continues to be a PosterChild in two Oscar-Winning Categories… Good Operational Management… and Bad Balance Sheet Management.
re 22- I just read your write up closer, you have already answered my question. CHK all around the area. You might take a look at slide 9 or GDP's write up. It looks to me like they are in LaSalle and Frio Co.; right above CRZO.
November 30th, 2010 at 10:17 amBOP – can I trouble you for a brief recap on your views on MMR – i.e. how risky is it at this point?
BTW, I read the "Dogs Decoded" transcript – really fascinating stuff.
November 30th, 2010 at 10:19 amre 22 – west. Planning to look at GDP shortly.
November 30th, 2010 at 10:22 amKOG and WLL pushing the envelope higher. WLL just short of all time highs now as it crosses $111.
SWN – I find it shocking that they are up given yesterday's data.
Does anyone have the full Canaccord schedule?
November 30th, 2010 at 10:23 amAdded EXXI here, reaction seems wrong to me
November 30th, 2010 at 10:24 amBSIC side note … I'm guessing no one here still owns this one. I continue to but am not adding given how thin it is. I do think we hear something in terms of an operations update soon, probably along the lines of BEXP having spud a couple of wells that they are a very junior Bakken partner in.
WLL = moving well. Continuing to hold the common in the ZLT and the $110 and $115 strikes in the ZIM
November 30th, 2010 at 10:26 amcome back in progress..hk is now up on the day
November 30th, 2010 at 10:26 am28- i think exxi is trading lower than pre xom deal which will spin of ebitda at 300 m per year
November 30th, 2010 at 10:27 amThanks for comment 23. Any yield thoughts on these new ones?
November 30th, 2010 at 10:28 amDid anyone get their Passport- PPI.V?
November 30th, 2010 at 10:28 amArgus on CHK quickie summary reexamines what CHK says vs. what it does, stirs in CHK's various accounting moves over time, hints at low ROI and higher risk, and votes:No. I agree. (I read what feels like a thorough summary.)
November 30th, 2010 at 10:29 amhttp://seekingalpha.com/article/239231-estimating-the-breakeven-costs-of-shale-gas?source=email_watchlist
November 30th, 2010 at 10:30 amFairly long article with summary of NG situation, prob not much new, but decent summary w/weather map.
Dman — MMR = well-watching at it's finest.
November 30th, 2010 at 10:31 amMMR = much riskier (operationally) than EXXI… so, I am just playing it for the news event. Unfortunately, there seems to be a delay on releasing news from the Blackbeard East logging run. Heard they did get the pipe-protected logging tool all the way to the bottom of the hole (in spite of a slight dog-leg in the well) last week. Then all they have to do it to pull it up slowly and log. So, MMR should have the results in hand by now. In the world of well-watching, "no news is not good news." Fact of the matter could be that BBE is a dry hole. That doesn't change much per se… but that sort of info historically does not move stocks up and to the right.
A prudent strategy on MMR right now (in line with current thinking, adjusted for the logging news delay) is to wait for the news. If it's "bad," that would be an oppy to buy, methinks. On the other hand, if EXXI sells off too on the news, I would be more inclined to add there, than at MMR. I just use MMR as a trading vehicle. And — frankly — it doesn't always have a happy ending.
I still have BSIC on my list of things-I-should-do-but-haven't.
November 30th, 2010 at 10:31 amgeneral announcement —- for all you long bias individuals — today is last day for +31 day tax swaps, must unwind on 12/31to avoid wash sale rule
November 30th, 2010 at 10:32 am>various accounting moves over time,
November 30th, 2010 at 10:33 amcan you give me an example of a chk accounting move
I agree they got cute with hedges
Z: SDRL earnings out today. Disappointing considering their significant outperformance to the group. Notes from CC: 1. raising div from .61 to .65 2. Have 1B in assets in their investments in other drillers. PDE, Seawell, Seahawk. Can use to pay for newbuilds ordered. 3. High priority is to highgrade their fleet. Only rigs built after 2000. 4. Best use of money is to order new rigs. Cost prices back to '05 levels. 5. Newbuilds coming out are finding homes without lowering prices. 6. PBR's in house builds will take a minimum of 4 years with much higher pricing. I get the sense that they may do joint venture with someone in house to be used more in that sector. I own for yield and sell 35 calls. Have switched my NE to SDRL because of my concern with NE's relationship with Pemex.
November 30th, 2010 at 10:33 amThanks RMD. Analysts are tired of the FCF outlook falling on lower gas prices and the continued outspend. Asking how much is enough, how many acres can Aubrey ski behind?! I still say he is the best landman out there and the deals work but I don't care to defend him today so I won't.
November 30th, 2010 at 10:33 amReef, #33-did not buy but watching, been on a tear lately, last 13 weeks, up from .05 to .36, up 19% today.
November 30th, 2010 at 10:34 amDefinitely interesting-w/your track record, I'm tempted but penny stks do not work very well for me.
Will look a little further.
#42-fairly unique web site:
November 30th, 2010 at 10:38 amhttp://www.passportpotash.com/index.php
#41 — Zebras don't change their stripes. Aubrey may have learned a bit from the School of Hard Knocks over the years… but the analyst's complaints have remained the same (more or less) for the last 15 yrs (more or less).
November 30th, 2010 at 10:38 am#43 — yeah. Let me know if you find an actual company presentation on that site. It alluded me.
November 30th, 2010 at 10:40 amThanks Tom
re 44. Yep, agreed on both counts. I only fault the analysts for the "risk" comment
November 30th, 2010 at 10:41 amre: 29 and 33….I own BSIC and will until you don't….I got a little of the Passport but it was moving so fast I didn't get much….
November 30th, 2010 at 10:41 amThanks BOP.
November 30th, 2010 at 10:41 amRe 37. I'm less impressed than I was the day I bought it, not due to the stock performance but further due diligence. I may just be selling the news.
November 30th, 2010 at 10:43 amReef # 33: With you on PPRTF
November 30th, 2010 at 10:47 amBill – Z will have ARGUS on CHK shortly
MMR — there is lots of other "good news" that could hit the airwaves… especially going into the Capital On Southcaost Energy Conf presentation on Dec 8th. Am told that JimBob is hosting dinner in his offices the night before. So, would expect to see him pour a stong one and do the happy dance. However, we just might have to brace ourselves that (in spite of JB's denials that the absence of the salt weld at BBE was not terminal) BBE might be declared non-economic.
November 30th, 2010 at 10:47 amHope I am wrong about BBE, of course. As I have money on a more positive oucome for that well.
KOG bumping $5. Can't tell if they speak this week or next at any of the 4 conferences that will be focused on energy.
November 30th, 2010 at 10:47 amReefguy.#33….Picked up a bunch @ $.18 Thanks.
November 30th, 2010 at 10:49 amKOG shows up as presenting at CapOne Southcoast on Dec 8th too.
November 30th, 2010 at 10:49 amZ, I've got KOG listed to speak at Southcoast on the 7th at 9 est
November 30th, 2010 at 10:51 amBill- Do you have a price where you start buying NM?
November 30th, 2010 at 10:53 amI show WLL speaking Thursday at the close at Jefco.
November 30th, 2010 at 10:55 amReef ,
November 30th, 2010 at 10:57 amBought Pssport at .28 Canadian. ….[many thanks]…….and of course wishing had bought more.
Also been in LEI for 5 months [trading along the roller coaster ride]. What is your exit strategy on LEI?
EROC, not a widely followed name here, is increasing their quarterly distribution to .15 and is currently trading at ~$7.80.
November 30th, 2010 at 10:58 am59, nice yield Mim, unfortunately not my area, but glad it's working for ya.
Re 54,55 – KOG – well I guess we have a week to figure out when they speak. I am planning to take my not one but two trading position off very soon. Will leave the core ZLT holdings in place, but they have had a very good run.
November 30th, 2010 at 11:03 amCorrection that KOG time for the 7th is 2:00pm central
November 30th, 2010 at 11:04 amhere is schedule
http://www.meetmax.com/upload/event_6427/COS%202010%20%20Energy%20Conference%20Schedule.pdf
> but I don't care to defend him today so I won't
November 30th, 2010 at 11:04 amlol
Does he spend alot, he does. But the JV deals have saved his butt and given him more confidence to re-invest the proceeds in the efs and Niobrara. Should he pass on those opportunities? I think not.
I'm more concerned with them and swn and HK cranking up production 25% or more a year. Get the leases Hbp and then holdback production until price goes up
Thinking was KOG to $5 and EXXI to $30 by Christmas. But early presents are gladly accepted also.
November 30th, 2010 at 11:05 amre 62, last sentence = TOO RIGHT!
November 30th, 2010 at 11:05 amjohn — my KOG presentation time came off the Bloomberg EVTS function… which is usually — but not always — correct. Thank you for tracking that down.
November 30th, 2010 at 11:07 amWLL – my guess is people are supposing the mid fairway Lewis and Clark wells are good and that the company will give an update prior to their presentation on Thursday at Jefferies. With the northwest and southeast corners of the play working well, punching good wells in the middle will help to prove up much more of the position as prospective for the Three Forks. Recall that WLL's L&C acreage is bigger than its core areas at Sanish and Parshal. They probably will also talk about their new Starbuck play in Montana.
November 30th, 2010 at 11:10 amNm is cheap here at 5.20. Not low enough to tempt me .. issue here is current rates and i dont see a catalyst to turn that around. Maybe 4.75 might get me off the sidelines
November 30th, 2010 at 11:11 amThere is a glut of supply in the market and more coming in 2012 and rates are falling and haven't improved
DSx got a buy from goldman today
do we actually pay the folks at the EPA for this?
November 30th, 2010 at 11:11 amthey cut cullulosic ethanol blending target to 6.6 mm gal in '11(from 6.5mm gal. in '10). The Renewal Fuels Std, passed in '07, mandated 250mm gal in '11 but there are no commercial scale facilities operating.
How do you spell Bureaucracy?
RMD – there's never enough fermented switchgrass around when you need it.
November 30th, 2010 at 11:13 amre 67- thanks. Mid 4.s is where I was thinking.
November 30th, 2010 at 11:14 amLei exit- lets get the two laterals tested by Hillcorp and find the door
November 30th, 2010 at 11:16 amGuru check your email.
November 30th, 2010 at 11:17 amOdd reaction to EGY news.
November 30th, 2010 at 11:19 ambop/others
November 30th, 2010 at 11:20 amDo you view pref stock as debt or equity?
Chk critiqued for replacing higher cost debt with lower cost pref stock which helped debt equity ratio's.
Well even if you consider it debt, its lower cost.
Im suprised the analyst didnt bring up Aubrey wine collection or margin calls
reef — we should hear on those two laterals within about 2 weeks (guesstimation). Does that sound about right for a Nov 1st spud date… ??
November 30th, 2010 at 11:21 amPreferred stock can only command a board seat, when the wheels are falling off the bus. Bondholders get to grab the keys. So, I consider "preferred" as "equity" only.
November 30th, 2010 at 11:22 amKOG just printed 5.000000000. Mini-Happy-Dance going on.
November 30th, 2010 at 11:25 amre 74. I consider it debt. And you left out the $75 mm map collection. But I hear ya, lower cost is lower cost. They easily service their debt load as it is and they pay 8% to participate in much higher return deals.
re 75 – timing is all over the map at the moment depending on who you are and the deal you have for completion crews so Reef would know best here for sure. As you know, all of the little guys are getting pushed back on timing. And some of the big guys too, EOG, although CHK hinted that was a joke of an excuse for cutting their production targets/
little guys are getting pushed back… but the wells are operated by Hilcorp… altho private, I would not consider them small.
November 30th, 2010 at 11:27 amRe 76. I don't look at stuff from the board/shareholder side as much as you do, I consider it something they have to pay and lump it in with debt for TEV and with interest for expense reads. But I get what you are saying and good point.
November 30th, 2010 at 11:27 amKOG at $5.04, 5 strikes alive and kicking.
November 30th, 2010 at 11:29 am#80 — the view is always different, if you are looking from the top down (like bondholders) or the bottom up (like common equity). But preferred is NOT debt-like. At all. It is "fixed-payment-like," agreed. But, so is abandenment costs when you drill a well too. I do lump the divident payments into fixed costs… but not interest expense (as they are not included in calculations for interest expense in bank covenant ratios). I'll give you that preferred is equity with bad breath.
November 30th, 2010 at 11:32 amzman – Is the EXXI performance based on the bad pricing of taking back the bonds or is this a longer term flame out of EXXI/MMR? Thanks.
November 30th, 2010 at 11:35 amMy opinion would be the former
Re 82. LOL
November 30th, 2010 at 11:36 amReef – how far are LEI's wells from EOG's big kahuna 2,000 bopd ish wells in Gonzales?
November 30th, 2010 at 11:39 amre 59, I don't own eroc but I watch for good MLP yields. I think with US bond rate's being low that a lot of money has been pumped into high yield MLPs. At some point that money will want to go elsewhere and there might be opportunities to get MLPs at better prices.
November 30th, 2010 at 11:39 amstraight preferred is just one more way to screw joe public. ranks right along with 30 year bonds at par and a 5 year call. Yields go down and you have a 5 year bond, go up and a 30 year bond. Yuck!!!
November 30th, 2010 at 11:39 amwhen does Lynn do equity again? I'm looking at a stock that's doubled since late August with a big funding gap for 2011 and current rabid interest, ie NOG, for Baaken equity. Not saying I disagree with the big picture view, I've been a Kogger myself in the past, just looking at it and thinking that now or soon is definitely the time.
November 30th, 2010 at 11:40 amFed purchases 6.8bln ……….. let the POMO rally begin
November 30th, 2010 at 11:40 amhttp://www.newyorkfed.org/markets/pomo/display/index.cfm
views vpp as debt, and i dont dispute that but again, if your cost is 2 and you sell at 4 that = profit
November 30th, 2010 at 11:41 amso he has an issue with the purchase of assets and the way they pay for them
critiques the full cost pool since it has the carries in it(ie the money they get from jv partners) which lowers their overall cost> He is speaking boths side of his mouth. the jv deals support/pay for the lease acquisition. Its one of the best things aubrey has done. Its the one thing SD hasnt done. they have a ton of assets and no partners and their balance sheet makes chk BS look pristine
Also mentions the cute hedges which i mentioned the day the q came out. he is about 9 months late on that one.
He obviously follows CHK very closely, maybe his steak was overcooked at last analyst day. I havent seen too many outright sell recommendation on any stocks.
The last 200 m efs purchase was the straw that broke the camels back in his view. Wants more focus.
I remember aubrey re land acquisition said, "you snooze , you lose"
Mim – right, thinking same. But thinking when that happens the only way to get the yield premium over bonds will be for them to either increase the distribution or fall. Either way, a headwind for the MLP group.
November 30th, 2010 at 11:41 ambop ty for 76
November 30th, 2010 at 11:42 amand z/others helluva call on kog at 5,00
Bill – I view VPPs that are long lived and tapped out from an exploratory and exploitation since (at least in the zones put into it) as a mostly harmless form of debt. KCS used to do these all the time.
November 30th, 2010 at 11:44 amBill you got to love somebody that gives you the opportunity to pick up cheaper stock.
November 30th, 2010 at 11:44 amRe: 33 Reef big thanks! ..in PPI.V at .2063
November 30th, 2010 at 11:48 amZman – Is there an event, whether it would be a restructure or more regulation, that would change your outlook on EXXI/MMR? It seems there is more positive reaction to the current level of oil on the part of onshore energy than offshore.
November 30th, 2010 at 11:48 amElduque – I wanted to circle back on your earlier question re wells and the EFS
First link is from EOG presentation:
http://www.eogresources.com/media/slides/InvPres_1110.pdf
Look at slide 9 – shows the oil, wet gas, dry gas windows over a big swath of the play (about 120 miles and 12 counties)
Look at slid 11 – shows their IPs – note Reef's LEI being in Gonzales county which has had EOG's biggest initial rates in the play
For a map of the counts with more legible names see this link:
http://geology.com/county-map/texas.shtml
Orient between the two off Bexar County (San Antonio)
November 30th, 2010 at 11:50 amRe 33 Thanks reef. I'm aboard. Was thinking of adding more. Thoughts?
November 30th, 2010 at 11:50 amReef – In at 0.23. Looking to add again on a pullback.
November 30th, 2010 at 11:51 amre 96. Not sure I follow you. I am positive on both. Do you mean a negative macro event that would make me think about getting out? Or do you mean something that would make me like them more, again, from a macro stance. Long term I believe they are sitting on a sizable resource pool in the ultra-deep. Near term I think we will get further evidence of this.
November 30th, 2010 at 11:52 amBSIC up 8% on size volume for the name. I have enough and am not planning to add to them.
November 30th, 2010 at 11:54 amSorry zman for not being clear. Third sentence in 96.
November 30th, 2010 at 11:58 amO.K., third sentence in 100, negative macro etc.
November 30th, 2010 at 11:59 amI sold my BSIC @ 1.13…looks like I put a floor under it…hopefully so for those still aboard
November 30th, 2010 at 11:59 amSlide 8-10 outline where GDP is in the play. .http://www.goodrichpetroleum.com/presentations/2010_11_10_Stephens_Pres.pdf
November 30th, 2010 at 12:00 pm#88-jat may have a point on possible secondary-Z, BOP any thoughts?
November 30th, 2010 at 12:03 pmThanks.
re 103 – If gas prices get really hit I'd be more concerned about MMR than EXXI. Other things would be the government. So far they have not held up EXXI's plans nor hurt MMRs that I am aware of. In EXXI's case this is because of the type of permits the company needs not being the same as the kind that are being slowly processed by BOEMER. Obviously another big spill in the Gulf would send the shares scuttling lower and the fear of further regulations would probably keep them down for an extended period. I think another big spill in the near future is unlikely. I don't see the P&A comment yesterday as being a big deal for either of them, especially EXXI.
November 30th, 2010 at 12:05 pmKOG 2ndary … I think Lynn will issue stock when he finds more acreage to buy. I don't think he will issue stock just b/c it hit $5. That said, I would love it, if he adds to his core acreage positions.
November 30th, 2010 at 12:05 pmNOG trying to break out from a short penant, moving into new all time highs. We know there is no equity deal to be done there and with a rising rig count in the Basin on the whole, their production growth target for 2011 looks to be the low end of the potential outcomes.
November 30th, 2010 at 12:06 pmBack to argus and chk..
He concludes his analysis with this thought
"The best time to buy cyclical stocks is when they are trading at the top of its valuation range"
November 30th, 2010 at 12:09 pmAs a value investor, I think exactly the opposite.
Re KOG deal … isn't it about time he actually used the revolver for more than just appearances. I recall the last time he did a deal he had just gotten the revolver in place and was talking about using it and then issued shares a day or so later. Besides, according to the Catalyst list it is up for redetermination Nov/Dec. Would like to see him think in terms of WACC.
November 30th, 2010 at 12:09 pmVYOG CEO said that he uses "equity for land acqtns and debt to drill." That seems about right to me. Lynn issued equity and did a land deal. I think he uses cash flow and debt to develop it. He owns a significant stock position (even if other officers don't).
November 30th, 2010 at 12:13 pmRe 110. I get what he means. When stocks are trading at the high end of the valuation range it usually means things are going well for them and they are going up. So his thought is "buy high and sell higher". At least that's what I bet he's thinking, without having talked with him. Personally like putting a framework around such statements regarding commodity prices. If stocks are at the high end because gas prices are falling then his statement is just useless.
November 30th, 2010 at 12:13 pm"debt to drill" only works in a resource play, btw.
November 30th, 2010 at 12:14 pmRe 112. Thanks for the color.
November 30th, 2010 at 12:14 pmWhile we are on the subject of issuing equity when does LEI do so, and how much below their self arrived at NAV of $6.00???
November 30th, 2010 at 12:21 pmOne point argus made was that marathon did a deal in efs at a cheaper price than chk
November 30th, 2010 at 12:21 pmIs all efs the same?
here are the details on marathons purchase
Marathon Oil Co. said it signed a deal to enter the Eagle Ford shale field with the $10 million purchase
of land from Denali Oil & Gas in one of the hottest areas in the U.S. oil and gas industry. Eagle Ford,
located in south Texas, has drawn interest from several energy producers seeking to expand their
operations into the total dense rock formations that could hold years’ worth of natural gas and liquids.
Under the terms of the deal, Marathon will pay Denali $10 million and drill and complete four wells to
receive about 17,000 acres. Marathon will have an option to buy another 58,000 acres from Denali in
Wilson and Atacosa counties, which would bring the total deal price to $209 million, or $2,800 per
acre. If Marathon fails to exercise that option by the October 31, 2011 deadline, Denali can opt to sell
those 58,000 acres for $92 million or $1,225 per acre.
Re 117 – As you hint, absolutely not all the same. That Antares press release gives a good look at the progression of deal prices done in the play. There are several above what CHK paid as well.
November 30th, 2010 at 12:24 pmZ: Which of your names are growing their CFPS most rapidly. No other restrictions. Thanks.
November 30th, 2010 at 12:27 pmInteresting blog supporting nat gas vs coal/wind/solar from Matt Ridley author of "The Rational Optimist"
November 30th, 2010 at 12:28 pmhttp://www.rationaloptimist.com/blog/coming-dash-gas
Tom – well it gets kind of wonky if you mean year over year because you have several names on the production hockey stick in the Bakken. Names of size that I own that will growth big digits are WLL and HK. But the NOGs KOGs and OASs of the world are going to blow the doors off a YOY % comparison.
November 30th, 2010 at 12:35 pmNames I'll be listening to at Jefco tomorrow:
CLR, NFX, GDP OR HK, UPL, SFY, OII OR CHK, HAL OR SM, EXXI, BEXP, CLB
November 30th, 2010 at 12:42 pmObama on CNBC now regarding meeting with Republicans today.
November 30th, 2010 at 12:48 pmStory yesterday on eastern canada/new brunswick players and regulation…
November 30th, 2010 at 12:55 pmhttp://telegraphjournal.canadaeast.com/front/article/1328428
Thanks for 124, he's right about the "clarity" issue, that's key.
November 30th, 2010 at 1:00 pmObama's comments make it sound like the two sides are still far apart on tax cuts.
November 30th, 2010 at 1:01 pmHow do I access the GDP presentation, please and thank you
November 30th, 2010 at 1:04 pmEld – I would assume there will be a link in the morning on their website.
November 30th, 2010 at 1:09 pmNothing on the website.
November 30th, 2010 at 1:10 pmOAS and NOG at all time new highs, pushing higher in what is a mixed bag of a day for the S&P.
ElD – I'm going through GDP's most recent stuff right now.
November 30th, 2010 at 1:10 pmre 129 – the presentation isn't until tomorrow so I'd guess they will get the link up by then.
November 30th, 2010 at 1:12 pmWas it over when the Germans bombed Pearl Harbor?
November 30th, 2010 at 1:24 pmhttp://tinyurl.com/29gmcf7
Hey, long time no see. Anything new and interesting in your world?
November 30th, 2010 at 1:25 pmWyoming, TexW, Gino, anyone want to give a quick lesson on reading fracture logs.
November 30th, 2010 at 1:31 pmVYOG up 13% … I was just saying yesterday it will probably go higher without me … well no kidding.
November 30th, 2010 at 1:35 pmZ: Are you surprised by the lack of response by APC to the recent W Africa discoveries? Do you think stock still has the legal issues weighing it down?
November 30th, 2010 at 1:38 pmre 136, yes and apparently. I'm not in, just watching. They are uncovering big value over there. Not so surprised that a gas discovery didn't move it but the oily ones have been ignored too.
November 30th, 2010 at 1:39 pmtidz down– they get an orri on mmr leases
November 30th, 2010 at 1:39 pmi wonder if bad news is being circulated
http://finance.yahoo.com/q?s=TISDZ.PK
GHS starts on EPL, notes they hold leases on-trend with MMR though that's not their focus. Sells for ~$16/boe of proved, ~$40m/boe/d of 4Q production.
November 30th, 2010 at 1:41 pm138 my add of TISDZ was unbrilliant.
November 30th, 2010 at 1:43 pm… or fear of bad news.
re 140 … time will tell, know you won't give up yet.
November 30th, 2010 at 1:47 pmThose EPL guys are speaking at a conference this week as well.
November 30th, 2010 at 1:51 pmRMD — by my calculations, you get about 3 right for every 1 wrong. You can't get much better than that… and still play by the rules.
November 30th, 2010 at 1:52 pmThanks ZMAN for your thoughts on EXXI/MMR. I was just thinking of unloading common because of their relative weakness.
November 30th, 2010 at 1:54 pmTalk about wondering if news is being circulated, BSIC up 13% on big volume (for it), with no news, is rather odd.
November 30th, 2010 at 2:01 pmAny news on WLL? Nice price and volume for WLL.
November 30th, 2010 at 2:09 pmre 146, news expected any day.
November 30th, 2010 at 2:11 pmre 134, you mean image logs? or horizontally logged pay in naturally fractured reservoirs
November 30th, 2010 at 2:13 pmI guess neither matters, all you can see is induced secondary porosity. And a hot gamma
November 30th, 2010 at 2:15 pmBG – Thanks, it is in the latest GDP presentation
http://www.goodrichpetroleum.com/presentations/2010_11_10_Stephens_Pres.pdf
slide 15, actually the Schmidt Dip plot was not something I recall seeing that way before, not in my books. After looking at again I guess they are just trying to show me fracture orientation.
November 30th, 2010 at 2:23 pmAhh, the dip meter reads differential gamma rays to determine bed dip at the wellbore I do believe
November 30th, 2010 at 2:26 pmand yeah, that plot they are showing is downward facing, showing azimuth of what THEY THINK are the principal stress directions for the fractures
November 30th, 2010 at 2:28 pmOf course, being in a lime, you can be a bit more certain
November 30th, 2010 at 2:29 pmThanks, got ya, I think.
November 30th, 2010 at 2:30 pmMHR: Overhead Supply
Back during 9/09 MHR acquired the US assets of Sharon in exchange for $2.35 Million 100% of which was paid through the issuance of 2,294,474 new restricted common shares of MHR. These shares have come off restriction and hense supply. From their release:
“During the quarter, Sharon realized approximately $900,000 from the sale of its Magnum Hunter investment. The fair value of the remaining investment of 1,832,152 shares was approximately $7.8 million at September 30, 2010. Subsequent to the end of the quarter, Sharon sold an additional 936,000 shares for $4.77 million. To date, Sharon has sold approximately 1,398,000 Magnum Hunter shares to realize $7.0 million.
Sharon continues to be in an enviable position, for a growth oriented junior exploration company, with a:
Significant cash position.
Substantial and highly liquid holding in Magnum Hunter Resource”
November 30th, 2010 at 2:31 pmI’d say this was a pretty high ROI deal for Sharon. Much better than drillng.
Stepping out for 30
November 30th, 2010 at 2:47 pmLEI ………reef thanks for the info on the exit strategy…….
November 30th, 2010 at 2:53 pmPPI-V correction was in at .18 Canadian not .28 my typo.
EGY
#1 ……..finally replayed the Q3 CC, in it Russ raised the estimated flow on S. Tchibala Dev. Well [2nd Horizontal OHGP] to 3,000 BOPD,…still 3,800 BOPD is a pleasant surprise.
#2 …..gas lift line from FPSO to the new Etame 7-H well is laid and connected……….line being flushed……….Etame 7-H will start on production withn a few days ……….at least 3,200 BOPD [NET INCREASE].
#3 …….Omangou prospeect vertical exploration well is currently drilling. It will test both Dentale and and Gamba sands………. NOTE: 3-D seismic indicateds the sands are much thichker in the Omangou Prospect………..well & logging will be finished B4 the end of Dec. so they claim reserves in 2010 if successful.
#4……Vaalco now has multiple offers on an Angola Blcok 5 [shallow offshore] partner [at the time of Q3 CC they only had one firm offer]. Today is the last day the Blcok 5 data room will be open. However, the final decision on a new partner will be up to Sonongal as the default by Interoil Norway reverted the ownership back to Sonongal
#5 3-D Seismic currently being shot in new area near the coast of Gabon, wont be processed until 2011.
#6 Etame study project is making good progress [all partners contribuitng team members]……….looks like they will recommend :
6A a new production platform in Etame from which they will drill several more development wells……..exact location will depend on outcome of Omangou exploration well.
6B increasing the oil processing capability of the FPSO to 35,000 BOPD (currently 25,000 BOPD………..primairy topside fluid processing trains
6C to date Etame has produced 53 million barrels of oil……..all the partners beilieve they have at least this much more to produce from Etame with the new 'LEAVE NO OIL BEHIND' mindset……..this implies the Etame RESERVES ARE SERIOUSLY UNDERSTATED by N&S Reserve Engineers.
No announcements yet on items 2,3 4. 5 . #6 was hinted at in the Q3 CC, but was extensively elaborated upon by somenone 'in the know at Vaalco".
What's the exit strategy for LEI?
November 30th, 2010 at 3:26 pmCargo – see 71
November 30th, 2010 at 3:33 pmThanks
November 30th, 2010 at 3:35 pmAll of them off the highs but the Bakkens also all showing higher than normal volume on these rises.
November 30th, 2010 at 3:36 pmCNBC looks more like CSPAN than usual today, never a good sign. Lots of lame ducks and others in DC taking center stage. Yuck.
November 30th, 2010 at 3:38 pmBuyers showing up on CRZO pullbacks today, so far. Daily volume double daily average. Will show up on all the end of day momentum screens tonight.
November 30th, 2010 at 3:49 pmZorg – thanks and agreed, been watching all day. Waiting now to see if budget committee comments tomorrow spook the market.
November 30th, 2010 at 3:51 pmBeerthirty, back in awhile. Hopefully the news flow expands for the group the rest of the week.
November 30th, 2010 at 3:52 pmKOG mkt on close buy imbalance 1,207,700 that's pretty darn high for KOG, wonder why.
November 30th, 2010 at 3:54 pmMMR getting trashed at the end of the day.
November 30th, 2010 at 3:55 pmaubrey on vpp last conf call
November 30th, 2010 at 3:58 pm>Aubrey McClendon – Chesapeake Energy Corporation – CEO
I'll let Nick answer. They see VPPs largely as debt, which is kind of nutty because I'm sure Nick will give you a good example of
why that is beyond nutty, but go ahead.
Nick Dell'Osso – Chesapeake Energy Corporation – CFO
They do see VPPs as debt. JVss they see as having a partner, they have a lot of question about what those JVs mean, but they
do not necessarily view that any differently than the rest of you guys would.
VPPs, we've had lengthy discussions with the agencies on this point and they continue to view them as debt. Again, we sell the
reserves, transfer title to them, we take the reserves off our books. The only obligation we have ongoing is to be a prudent
operator of the property, and they are a partner in the property like anyone else is. So we do have the obligation, as they are
now a royalty owner in the property, to pay their operating costs. So that's no different really than any other royalty owner.
And if you think about the way that those guys are going to look at it as debt, one of the things that we always scratched our
head about is if we do a VPP in a gas price environment of 2011, where the strip is going to average something in the, let's call
it mid-5s to low-5s versus having done a VPP in first half of 2008 where the strip was much higher than that, it's actually going
to result in more debt in 2008 than in 2011 for the same property just because the price was higher. And it's really just an
obligation in volumes and it can't be measured as debt.
Aubrey McClendon – Chesapeake Energy Corporation – CEO
So call it 400 Bcf that we sold for $1.15 billion. If we had sold it for $1, they would consider that a better deal than if we had sold
it for $4 billion. They would consider $4 billion a bad deal because it's more money and therefore more debt. Of course, they
ignore the cash that you get from selling it. So it's one of the insanities of dealing with rating agencies and there is probably no
better definition of it than that one.
MMR — two thoughts… 1) hope JimBob steps out from behind the curtain tomorrow and lets us know what's going on… good or bad… it's time for an update. And 2) the short interest in the stock is at the highest levels since last January and this is the last day of the month. I have often seen hedge fund-centric positions take a dive (or bounce) on the last day of the month.
November 30th, 2010 at 4:00 pmSeems to me, we should know something soon. You can bet that JimBob did not miss the fact that his stock is down over 7% today.
Jim Bob is not the only one who noticed the stock was down 7%. You all have a good evening. I am going to the beach and cool off. That's not fair is it?
Aloha
November 30th, 2010 at 4:06 pmbill 168: how about debt repaid in gas?
November 30th, 2010 at 4:20 pmCHK gets needed cash upfront but must pay all op costs. Didn't they sell the last one for under $3.00/m; connotes needing the money to me.
Guessing JB will talk when they have the log done and not half way through it, always takes longer than people would like. Guessing that EXXI speaks to soon-ness of more data tomorrow at Jefco if there is no release by then.
November 30th, 2010 at 4:21 pmRe 171 I guess op costs are kind of like the interest on the debt. There is still an obligation to provide the gas.
November 30th, 2010 at 4:25 pmMMR I get this bad feeling The Friends know and I don't.
November 30th, 2010 at 4:30 pmWhile OT, STX cancelled LBO discussions 'cause valuations weren't high enough. Meanwhile it occurs to me that a high % of E&P stocks have raised equity. Just musing before I get to winethirty.
MMR tripped the P&F sell signal with the $14.50 print….although the intraday and even the daily don't look so hot, there is some interesting support symmetry on the weekly and P&F charts, major P&F trendline support at $12 which corresponds with lower ascending weekly trendline support, so for those with a longer term outlook this could be a nice developing buy opportunity….
November 30th, 2010 at 4:40 pmKOG news.
November 30th, 2010 at 5:17 pmhttp://finance.yahoo.com/news/Kodiak-Oil-Gas-Corp-Completes-prnews-3847891947.html?x=0
Re 176 – that looks pretty much as expected.
Ex the acquisition the exit rate range straddles the prior 2,500 bopd target; I'm not going to sweat timing of the 4 well pad coming on just after as opposed to by year end.
4Q volumes are higher than I was looking for at 2,100 boepd vs my 2,000 boepd.
Saying they will provide 2011 capex and production guidance in the next few weeks, won't be surprised to see triple digit YoY growth for 2011.
November 30th, 2010 at 5:25 pmGFS: Canadian frac co I mentioned several weeks ago, planning expansion into US:
November 30th, 2010 at 6:13 pmhttp://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGFS-1785871&symbol=GFS®ion=C
Re #151.
November 30th, 2010 at 6:20 pmA dipmeter normally uses closely spaced (in a horizontal sense, as many as 64 or more) micro resistivity curves that are computer matched for semblance (correlation) so that the vector components (orientation and dip magnitude) of a planar surface cut by the wellbore can be calculated.
Imagine a cylinder covered w/64 resistivity sensors around the outside of the cylinder spanning only a few vertical inches. Thats what the dipmeter tool looks like.
JY – thanks, I was thinking of how to read their output on that slide.
November 30th, 2010 at 6:21 pmGDP slide #15 is a composite of a "microimager log" wellbore image (from densely spaced resistivity sensors) on the far left, fracture strike (direction) and dip in the yellow area showing most of the fractures run NE-SW and dip nearly 90° (mostly vertical) and the "Schmidt Plot" which is an equal area projection of the "poles to the fracture planes". The short version of the "Schmidt Plot" in this instance is that you would orient your horizontal well direction in a NW or SE direction to intersect the maximum # of natural fractures. Note on slide #10 the GDP wells (little red sticks) are oriented in that direction.
November 30th, 2010 at 9:52 pmre 181, OK, gotcha, thanks on the plot.
November 30th, 2010 at 10:57 pmhttp://www.nytimes.com/2010/11/30/business/energy-environment/30utilities.html?_r=1&ref=business
November 30th, 2010 at 11:19 pmConversion to NG "may" finally be picking up the pace.
Just going over some late night notes, old name FPP, another SDM I don't talk about but used to know well, drilling Bone Springs wells with XEC and soaring.
December 1st, 2010 at 12:36 amhttp://www.asx.com.au/asxpdf/20100624/pdf/31qzml4n2r201n.pdf …………page 46, Twister prospect sold 75% wi to NBL and retained 60% of 25% wi with 500k $ carried. T9N-R61W section 36 is CRZO drlg location for two Niobrara wells with one now in turn. Section 16 same township is their first well. Section 9 same township is CLR's Pump House Prospect and their first Niobrara well.
December 1st, 2010 at 1:04 amWest you do some of your best work in the wee hours of the morning. Thanks for SDCJF piece above. Quite a tour.
December 1st, 2010 at 7:15 amOPCO likes HES:
"
HES Hess tgt raised to $84 at Oppenheimer on higher oil prices & exploration potential (70.05 )
December 1st, 2010 at 7:40 amOppenheimer is raising their tgt to $84 from $70 on expected higher oil prices, increased production, and high impact exploration. HES recently announced two acquisitions in the Bakken that will boost its current leases of 510K net acres in this oil shale play in North Dakota by 260K net acres, or 51%, to more than 760K net acres. Both acquisitions are expected to close by the end of the year and are likely to lift the co's guidance for spending and production in the play by more than 30%. Net 2015 production from the Bakken could significantly exceed the current 80 mboed guidance, making HES the largest producer in the play."
CQP: From yesterdays Heard on the Street. Nice yield too.
Why should Russian behemoth Gazprom worry about Cheniere Energy, a minnow struggling under a debt nine times the size of its $317 million market capitalization?
http://online.wsj.com/article/SB10001424052748704679204575647143626625572.html?mod=djemheard_t
December 1st, 2010 at 7:43 amHere is link to Cannacord presentations today, including ATPG MHR REXX TAT among others
December 1st, 2010 at 10:06 amhttp://www.wsw.com/webcast/canaccord3/
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