Much Ado About Nothing. At least that's the story of the past week's return trip to S&P 1,300 and Dow 12,000. We came, we rose, we got sacked by riots in Egypt is another way of looking back at the week. GDP was fine and final sales were beyond anyone's expectations. But turbulence in the Middle East provided a good excuse to rally WTI which had been lagging international crudes and to sell off the US equity markets. Energy had a good week with strong results in Service and Coal names (and coal should be interesting in the coming week as well with ANR scooping up MEE late Friday).
Holdings Watch: (Last week's closed trades)
- HAL – Added (30) Feb $44 calls for $0.17 with the stock at $39.30. High risk trade but it doesn't have to get close to the strike to be profitable. See last Monday's post for comments on the HAL quarter. The market was slow to react to a good quarter and didn't wake up to the better than expected results and outlook until Wednesday.
- HAL = Sold (10 of the 30) Feb $44 calls for $0.75, up 315%. Will continue to play this with house money. I also continue to own the common in the ZLT.
- Added (15) HAL $45 Feb Calls for $0.40 with the stock giving up a little of yesterday’s gains at $42.40. I continue to hold (20) of the $44 strikes and the common in the ZLT.
- Sold (10 more of the 20 remaining) HAL Feb $44 calls for $1.32, up 676%. I continue to hold 10 of these, 15 of the $45 strikes and the common in the ZLT.
- HAL – Sold the $45 strike Feb calls for $0.91, up 120% since inception on Wednesday with the stock at $43.77. I continue to hold the (10) $44 calls and the common in the ZLT.
- WLL - Sold 3 of 5 Feb $120 Calls taken last week for $5.70, up 148% as the stock trades around $123.
As Z mentioned above:
http://dealbook.nytimes.com/2011/01/29/massey-energy-is-to-be-sold-to-alpha-natural-resources/?hpw
Doing business in Russia is like living in a snake pit, you never know where the next snakebite is coming from.
Poor BP.
http://www.bloomberg.com/news/2011-01-30/tnk-bp-billionaires-to-consider-dividend-halt-as-rosneft-dispute-escalates.html
Best of luck tomorrow, Z, my family to yours.
Regale – thanks very much.
We'll have the Monday post out shortly after midnight CST.
Equity futures taking a dive early.
Oil rallying back towards $90.
CHK and CNOOC strike Niobrara shale deal.
good deal for both
4500 acre
and shocked that they have amassed 800,000 acres. Aubrey best land man out there
Interesting Trump interview;
http://www.newsmax.com/Headline/trump-opec-oil-egypt/2011/01/30/id/384427
Nice write up about Samson and King HAL. That sentence looks funny. It reminds me a lot of the UPL/HAL deal earlier in the Jonah field, back in the day of Snyder and McMurry Farms. As I understand, almost bankrupt them, sweet deal for the King. Moral of the story is not to mix service providers with working interest (unless the services are internal). SLB has a strict policy not to do so, they may take pay out of production but never a WI.
Rotation gig is over, back to Joe vs. The Volcano tomorrow. All work and no play makes Jack a dull boy ….
Thanks Wyoming, good to hear from ya.
CHK is thinking big with the potential reserves there too. On an unrisked basis, on 800,000 acres they see drilling 11,000 wells or 70 acre spacing. They've bumped the net of royalty unrisked reserve potential of all of that to 5 B barrels. That's mongo large, like recoverable barrels of almost 8,000 barrels per acre. Seems awfully early to be making that kind of claim having a whopping 16 wells drilled. Just for fun, and again, on an unrisked basis, that puts > 115 mm BOE under SSN's 14,900 (post HAL deal acres). My $15 per barrel in the ground figure would get you $17 per share before we started talking about cash and other assets. Somebody else might publish those kind of numbers this early in the game but not me. I'll be taking up my back of the envelope NAV to account for this deal and the HAL to $3 tomorrow.
BedTime Market Strategist —
Geopolitical Jeopardy.
Once again, the activity in Egypt illustrated that in the world of financial markets, stability trumps democracy. The incipient potential revolution forming in Egypt caught a buoyant U.S. stock market by surprise. Friday's selloff was the largest down swing since the 2.8% loss the day after the August 10th FOMC meeting. The concerns among investors are many: disruptions at the Suez Canal, loss of a Western ally, the potential leadership vacuum creating opportunity for extremists, and the chain reaction of revolutionary sentiment spreading to oil producing nations. Regardless of what evolves in this very fluid situation, most of it equals more instability in an unstable region. Friday night was the key flashpoint in the protests when the unpopular police and Department of Interior Forces retreated from the streets as the situation escalated beyond their control. It is also believed that the Ministry of the Interior and Police released prisoners form the jails to fuel unrest in the streets. At that point the army, which has popular standing among the people, rolled in to help provide security as the police force essentially dissolved. Since then the army appears to be operating with a light touch, simply providing security, tensions have eased modestly. On numerous occasions, troops on the ground stated they would not fire on the people and that they would stand with the people. Many of the reports over the weekend showed soldiers inviting protesters up on the tanks as well as permitting them to spray-paint "Down with Mubarak" on the vehicles. By all accounts, the uprising appears to be a secular one with nationalism and anti-Mubarak sentiment at its core. The protesters believe they have passed the point of no return and cannot leave the streets until Mubarak steps down. The larger concern is if Mubarak flees, then who will emerge from the leadership void with power. Former U.N. official and Nobel Peace Prize winner Mohamed ElBaradei appears to be the front runner, being well known to the global community, but also having a relationship with the lead opposition group in Egypt, the Muslim Brotherhood.
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Markets do not like surprises, but at this point, the initial surprise is over. It remains to be seen whether tensions recede, escalate or take a truly bad turn. From a technical perspective, nobody wants to buy on the first day down. As such, investors should let this move run its course for a few days. If selling pressure persists over the next few days, then by Tuesday or Wednesday we expect real buyers to materialize. On the domestic front, disappointing earnings were offset by a good GDP report. Although GDP missed expectations, Final Sales did register 7.1%, the best gain since 1984. Importantly, businesses sold from inventories and the change in inventories subtracted 3.7% from GDP. Such inventory adjustments are generally driven by recessions. Going back to 1948, in scenarios where inventories subtracted more than 2% from GDP and GDP was 2% or greater, the following 2 quarters posted average GDP prints of greater than 4%. Going back to 1980, the subsequent three quarters averaged gains of 4.45%, 4.75% and 4.65%. We cannot predict whether historic averages will repeat, and this number has two more revisions coming, but it does help place the recovery on more stable ground. It further reinforces the likelihood of buyers emerging as this corrective move runs its course
(sorry about the formatting.)
No worries, I can read it without my glasses, 😉
Best wishes to you and the Little One tomorrow.
Thanks much BOP!
thx for all you do Z…best wishes tomorrow….BOP and others will keep the site alive…maybe I'll tell a fib or two…
thx to irongate I believe it has been for prompting us on the opportunity in the coals…I bought a little bit of late and with the Aussie situation and the ANR bid for MEE coming to fruition…maybe a little coin can be had there…
night night….us old tarts need our rest
Thanks Jivey. Monday post out in a bit.
God bless you little Z, you’re in good hands.