Vacation Wednesday

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Lost the first version of this post so I'll be brief,please bear with the lack of formatting until tomorrow's post when I will have access to a full keyboard again.

Thanks for the updates of market levels and credit.

Commodity watch

Oil up $2 yesterday and trading >$97 in the overnight session
NG - we remain range bound. Hot weather and another group forecasting a busier than average tropics season contributed to modest bounce yesterday but I don't see much forward price progress until we see production flatten and then slip.

Re KOG - nothing says confidence that you have a good grip on the 3q numbers and that the 2q volumes won't be that bad like the numbers guy buying 10M shares in the open market. Even Cramer gave them a nod last night.

The Bakkens showed good resilience yesterday due to oil and the group short is getting very long in the tooth.

NOG piece - next week - think positively because the numbers sure do shake out that way.

Re 18 from yesterday, - thanks. Agree with Aubrey's comments re shale oil being found in lots of parts of the world but would add that the pressure pumping equipment needed to make a significant global production bump. We will need to see a big and sustained ramp in the rig count as well.

GEVO - will look at get back to by tomorrow with thoughts.

73 Responses to “Vacation Wednesday”

  1. 1
    italyinvestor Says:

    Z- Continued to nose around in Carrol County, OH where CHK is drilling. Recently buried pipelines are marked “petroleum” as opposed to “natural gas.” All previous pipes in the area are marked NG. Of course by definition NG is a part of petroleum, but i’m hoping its going to condensate or crude… Some lease holdouts were getting up to $2500 and acre with 15% royalty. Will let you know if we get a check, they’ll have to disclose what they have if and when they pay 🙂

  2. 2
    jat Says:

    GEOI out with their Eagleford wells. Looks good.

  3. 3
    BirdsofpreyRcool Says:

    Some early observations by XACS#1 this morning —

    Credit gave back a portion of last week’s tightening on Monday, and early morning Tuesday trading seems to be following the same script. Many of the reasons cited for the arresting of last week’s rally and this week’s widening seem to be a simple rehashing of the same reasons that caused the IG16 Index to trade through 100bps. Retreaded ideas normally do not have the same impact. However, given the elevated level of credit spread volatility and the recent success of range trading the CDX IG16 Index, we continue to believe that the likelihood of the CDX IG16 Index trading at 100bps is greater than the index trading at 85bps.

    We also believe that market’s reaction to negative earnings announcements is likely to be much more pronounced than any tightening due to beating guidance. We also expect that a poor NFP number this Friday could be met with a quick move wider.

    That being said, continued fundamental improvements in credit, FED accommodation, and low and stable bank funding costs are unlikely to drive index spreads wider than 100bps unless materially worse news is unleashed on the market.
    So what does it mean….there will probably be a better equity entry point later this week as credit indices push wider…. but that any sell-off driven by “CREDIT” worries will be short. Nevertheless, a credit widening is likely to drive the VIX a little higher.

  4. 4
    Zorgnak Says:

    S&P Futures Near support and overnight low in the 1329-30 area. Near Resistance in the 1336.75 area. Expecting rotation lower but then so is everyone in the known universe. Put buying is still in vogue it seems.

    1342.25 Resistance, Minor CHVN, O/N High 1340.75
    1336.75 Resistance, CLVN
    1329-30 Support, CLVN, O/N Low 1328.75
    1319 Support, CLVN
    1315 Support,CLVN
    1310.25 Support, CLVN
    1308 Major Acceptance-Congestion

  5. 5
    BirdsofpreyRcool Says:

    #3 errata = should read TUESDAY and WEDNESDAY (not Monday and Tuesdday), of course

  6. 6
    zman Says:

    Thanks Jat for the GEOI heads up, still holding. Good resultsnon EafS. Note all the aggressively named non operated Bakken wells run by Slawson in the bottom of the pr are the second short lateral per section in the Windsor area – south Sanish – those are almost all NOG wells. Could see an update a’s result of that.

  7. 7
    bathtime Says:

    OT: CIGX. At bottom of Streetsweeper articles:

    * Update: TheStreetSweeper closed out its short position in CIGX on July 5 through the following transactions: selling its 800 contracts for the July $5.50 puts at an average price of $1.21 apiece; selling its 350 contracts for the July $6 puts at an average price of $1.62 apiece; and covering its short position in CIGX common stock by purchasing 49,300 shares at an average price of $4.52 a share. TheStreetSweeper will be looking to establish a new short position in CIGX if the stock moves higher, and will further update this disclosure with the details of any future trades as they occur.

  8. 8
    BirdsofpreyRcool Says:

    OT: thanks, bathtime. Seems like they didn’t make the killing they expected to on Star. As said, their arguments were old and fell onto well-trod ground. Not like NOG, which had never been the target of a public short attack before.

    It’s not over. Too many shorts still trapped (or holding on) in CIGX. There will be more Fun and Games, I’m sure. But until we have some fundamental info, it’s all Sound and Fury, Signifying Nothing (for both shorts and longs).

  9. 9
    BirdsofpreyRcool Says:

    Anyone live in the Phoenix area? Heck of a SandStorm you had last night… HeadTrader is still shaking sand out of his ears and nose…

  10. 10
    VTZ Says:

    Decent sized 2 day move in yellow metal to work itself back into the range from 1525-1550. Pretty good response from being at risk of breaching the resistance around 1480 which could have led to a shorter term drop as low as 1430.

    Note that the rallies over the past 2 days have been in the face of the rising dollar as they are both currently being considered safety assets due to the Euro shenanigans.

  11. 11
    zman Says:

    Re 10 – zero hedge pointing out gold is the only currency without counter party risk, lol

    ISM came in a touch light

    Group soft with market but not a lot. The GEOInews is strong enough to keep me in a little longer. More detail in the ops update than usual so maybe they are getting the message.

  12. 12
    zman Says:

    Motley fool touting some stock that will “explode” when HR 1380 passes …. That’s the natural gas act and I give it no chance of passage this congress… Be careful where you get your news.

  13. 13
    skimo Says:

    One of the biggest gold and copper mines in the world has been severely hit by a bitter pay dispute, union leaders at the Indonesian facility say.

    Thousands of workers began a week-long strike on Monday at the mine in Indonesia’s Papua province, run by US firm Freeport McMoran.

  14. 14
    RMD Says:

    I can not find a DBLE release about a strategic review/possible sale. Does anyone see a web link?

  15. 15
    zman Says:

    In Atascosa county, looking for EFS rigs.

  16. 16
    BirdsofpreyRcool Says:

    Oil prices back to where they were, pre-SPR release.

    This is a Poster Child for what is wrong about Too Big Govt. They (officials) think they can micro-manage an economy. Well… they can’t. Too many “messy things happen.” Oft times, the more you try, the more things scoot in the wrong direction.

  17. 17
    elijahwc Says:

    #12 = David Gardner’s #1 Stock for the Coming ‘No Choice’ Fuel Revolution?”

    Toss all that into the Thinkolator, and we find the answer right quick: This is our old favorite Westport Innovations (WPRT)


  18. 18
    Justin Says:

    BOAML (G.Yang) update on HK after “meetings” w/ COO Stoneburner.
    – HK in Development phase – no more portf. expansions
    – Haynesville almost held by prod, well costs down ~$1.5m.
    – well on way to liquids target of 24-28% by 2013
    – ML NAV = $44 * 20% disc = $35PT
    – Stoneburner says portfolio worth $65/shr based on today’s O&G strip prices

  19. 19
    Zorgnak Says:

    #17 thanks eli..just bot some on the pullback this morning

  20. 20
    elijahwc Says:

    PPRTF: Reef, you still in touch with this blast from the past? Looks like it might be put in play again.


  21. 21
    zman Says:

    America at work watch. In south Tx, five rigs two big gas flares and two medium diameter pipes under construction, sand trucks everywhere, couple of big equipment lots (good work if you have land to rent), all seen in the last five minutes. Just right there, easily 100 plus jobs. … Dear Mr President…

  22. 22
    choices Says:

    RMD-#14-DBLE-could not find link but did note this:

    Double Eagle Petroleum Started At Buy By McNicoll Lewis Vlak

  23. 23
    zman Says:

    Received NOG piece feedback, will have the piece out next week

    Signing off as I stare at the abyss of southwest TX cornfields, empty of rigs now as we have passed through the heart of the EFS now, nice country and can’t yet smell Corpus.

  24. 24
    RMD Says:

    choices, thanks.

  25. 25
    zman Says:

    NOG 1 month high.

  26. 26
    choices Says:

    It is only a matter of time-wake up-pol’s

    Brief note on SA’s streaming news page:

    “The ever-widening spread between WTI and Brent crude has oil sands producers chafing at having to sell product at the cheaper, landlocked WTI price. With the Obama administration holding up a pipeline to the Gulf, Enbridge (ENB) is proposing one to Canada’s west coast.”

  27. 27
    zman Says:

    … And China says thank you.

  28. 28
    zman Says:

    Zorg or anyone, where do you have the 200 day on NOG? Thanks

  29. 29
    choices Says:

    further to #26-the spill in Yellowstone River will only complicate (read slow or stop) the decision on Keystone Pipeline-MT Gov Schweitzer, one of the very few pol’s who I respect, is more than a little frustrated with XOM-shut off monitoring was in Houston-took 30 minutes to shut down pipeline after noting pressure drop, damaging very beautiful river and countryside-Schweitzer says Transcanada promised to bury proposed Keystone pipeline much deeper under rivers via horizontal bore-XOM’s ruptured pipeline only 4-6 feet below river bed.


  30. 30
    VTZ Says:

    choices – Oil sands producers aren’t selling synthetic lights (from upgraders) at WTI prices. We are selling them at about WTI + 7.50. However that’s because of the refineries in the area.

    Heavies on the other hand are selling at a 30 dollar discount to the synthetics. These volumes are like Devon’s Jackfish, Suncor Firebag, Cenovus, Baytex, etc etc.

    So while they are at a 22.50 discount to WTI, that is not a completely unreasonable discount in the context of WTI prices. Traditionally the light/heavy differential has been in the 30 dollar range and higher in 2008 before.

    As a producer/Albertan/Canadian I would like to see the market for our crudes expanded regardless of US politics to help weather future downturns South of us. The US politics are only a contributing factor.

  31. 31
    Dman Says:

    This paragraph from an NYT piece caught my eye:

    “Compared with most advanced economies, Asia’s are in an enviable position.

    Unlike the United States, Britain and some other rich countries that are saddled with trillions of dollars in government debt, Asia’s big economies have large reserves and small debt burdens.”

    So according to the NYT, “rich” countries are saddled with $trillions of debt. At what point will it dawn on the NYT that if you have enough debt, you don’t get to be called “rich”. Unless of course, you can get away with defaulting on it. For some reason the default idea appeals to me. As in “you lent us all that money… what were you thinking??!!”. I guess those biblical folks must have known something when they warned about the evils of debt.


  32. 32
    Dman Says:

    Z – $23.28. NOG just tagged it more-or-less.

  33. 33
    crysball Says:

    Regarding Potash……..are you still liking Ringbolt Ventures [RBV Canada]?

  34. 34
    elijahwc Says:

    GEOI: Rodman out on GEOI saying they are adding a buck to NAV

    “Nice Eagle Ford results right out of the gate. GEOI announced strong
    results from its first 2 Eagle Ford Shale wells. The wells, the
    Flatonia E Unit #1H and #2H (both 50% w.i.), are located in Fayette
    County and had IP rates of 1,274 Boe/d and 1,322 Boe/d (>90% oil) on
    an 18/64″ and a 16/64″ choke, respectively. The #1H was completed with
    10 frac stages while the #2H had 14 frac stages. After testing the
    wells, GEOI choked them back, and they have averaged 487 and 495 Boe/d
    over the first roughly 2 weeks of production. We view the results
    positively and think the wells could end up topping our ~350 MBoe
    typecurve assumption, although we plan to wait for additional well
    results and production data before adjusting our per-well assumptions.
    GEOI is currently running 1 rig in the Eagle Ford, but plans to ramp
    up activity significantly over the next year. The company plans to add
    a 2nd rig to the play this fall, a 3rd early next year, and
    potentially a 4th in mid-2012.

    De-risking Eagle Ford acreage. As GEOI had yet to report results from
    its Eagle Ford position, we were applying a conservative risk factor
    of 85% to its acreage. With the strong initial results from the play,
    we feel comfortable decreasing this to 67%. The positive impact of
    this is slightly offset by an increase in our spacing assumption on
    the company’s acreage to 160 acres from 125 acres. As a result of
    these adjustments (plus the incremental 1,000 net acres the company
    added to its position) we are increasing our estimate of risked
    potential on GEOI’s position (now 24,000 net acres) to ~14 MMBoe from
    ~8 MMBoe. This adds ~$1 to our NAV.

    Trimming estimates on Bakken delays. Mother Nature continues to be
    uncooperative in North Dakota where Bakken players have battled spring
    flooding after a bitter winter. As a result, the company’s Bakken
    volumes are likely to be shy of our expectations. And while our new
    estimates assume a slight drop in Q2 volumes, we do still expect to
    see a meaningful production ramp starting in the back half of the
    year. As a result, we are trimming our 2011 production forecast to 5.1
    MBoe/d from 5.4 and our 2012 production forecast to 6.7 MBoe/d from
    7.0. This causes our 2011 and 2012 CFPS estimates to fall to $3.19 and
    $4.56 from $3.44 and $4.75.

    Raising target price to $34; reiterate Market Outperform. Despite the
    reduced production forecast, the nice Eagle Ford wells leave us with a
    positive take-away from the update. We think there has been a fair
    amount of skepticism regarding the company’s Eagle Ford position, and
    the nice start should help quiet some of the doubters. Our target
    price rises $1 to $34 as a result of the Eagle Ford Shale de-risking.
    We’re buyers of the stock at current levels as we like the company’s
    upside from the Bakken and Eagle Ford, and think the Williston Basin
    weather issues are already discounted in GEOI’s stock price. We arrive
    at our target price by applying a 1x multiple to our NAV of the
    company’s proved and risked upside reserves, valued at long-term
    commodity prices of $90/Bbl and $6/Mcf.”

  35. 35
    choices Says:

    #30-VTZ-thanks for comments-I grew up centuries ago just south of you (between Shelby and Havre) and I’m now a very angry ex-Montanan but I still believe Keystone should go forward because of promised safeguards.

  36. 36
    VTZ Says:

    Re 31 –

    Default on even a portion of US debt -> purge of US paper paying next to no interest -> USD crash + drastically increased borrowing rates -> Bigger deficits -> inability to pay off other debts + social security + medicare + medicaid + pensions -> further default

    … back to the beginning

    The alternative is QE but I’m sorry, the Fed can’t absorb trillions in debt forever to “fix” the problem without repercussions, but they’ll try as long as they can.

    Either way long term rates are going wayyyy up.

  37. 37
    VTZ Says:

    RE 35 – Happy to hear that someone agrees with it. That pipeline is already going to have industry-leading everything because of all the politics involved. If it’s not going ahead we might as well shutdown the entire pipeline system and buy shares in Trek, Kona, Canondale, etc.

  38. 38
    zman Says:

    Thanks Eli

    Thanks dman

    Thanks for the color VTZ. Agreed re pipes, add ll bean to that list because for blanket / sweater exposure.

    Saw a bumper sticker saying “exxpose exxon” and my response to him as I passed was “stop driving”.

    Losing signal as we approach Mexico.

  39. 39
    1520sbroad Says:

    #9 – word of the day – haboob – check this link for some video on that dust storm. As an east coaster I have never seen anything like that…


  40. 40
    Zorgnak Says:

    NOG…Nice bounce today..coming into significant resistance before 24 at around 23.30-ish

  41. 41
    Zorgnak Says:

    KOG Resistance at 6.50..trading above acceptance/support at 6.

  42. 42
    Zorgnak Says:

    3rd attempt at 1336.75 area in three days.
    1329 support.

  43. 43
    elijahwc Says:

    The early list of presenters at Global Hunter Securities Cofab for the week of 7/17. All the usual suspects with one very interesting new name, XTMCF.


  44. 44
    bathtime Says:

    29 – choices, I’m a big fan of Brian Schweitzer. Very smart and skilled guy.

  45. 45
    RB Says:

    Briefing reports that RIG trades to session low on rumors it has a rig in danger of sinking and that the rig is being evacuated…oh brother

  46. 46
    BirdsofpreyRcool Says:

    GEVO = starting to make the investor rounds. Will meet with Marsico and Janus tomorrow… Marsico was the big seller the other week. Bet they figure out it was not the correct decision. Stock should have been UP on the ethanol subsidy-ending news… not DOWN.

  47. 47
    jim bob is my jesus Says:


  48. 48
    RB Says:

    thx…I didn’t know where it was situated; at least it isn’t in the Gulf…but I am long RIG shares

  49. 49
    tomdavis12 Says:

    RIG 2nd largest shareholder John Paulson 24M shares.

  50. 50
    choices Says:

    Grains really getting whacked over past few weeks-USDA suddenly found many more acres planted which were not in the original tally-heh

  51. 51
    Justin Says:

    Paulson likes HIG too. Maybe those algorithms aren’t too complicated after all. (sorry, bad joke.)

  52. 52
    choices Says:

    Paulson took several hundred million loss on TRE.

  53. 53
    RMD Says:

    big blocks of AREX cross at bell by Nomura (who is not a broker I would have expected).

  54. 54
    reefguy Says:

    20,32_I do not like Ringbolt as Passport now controls their Holbrook leasehold/
    PPI.V I am legally radio silent…..

  55. 55
    zman Says:

    Arrived South Padre, better post tomorrow. So many bikinis, so few eyes with which to watch them.

  56. 56
    Zorgnak Says:

    US API Crude Oil Inventories (Jul 1) W/W -3172K vs. Prev. -2699K

  57. 57
    Pati Says:

    7.8 Earthquake off New Zealand/

  58. 58
    Robert Says:

    ZMAN betterbe careful with those Corpus Christi remarks, it’s where I grew up. Where the grass grows and the oil flows and it never snows. It is the end of the world, if board check out the Art Museum of South Texas and notice the name on the new wing!

    Bikinis not many in July but a whole bunch at Spring Break.

  59. 59
    Zorgnak Says:

    Goldman: Oil supply will be “critically tight” in 2012

  60. 60
    zman Says:

    Thanks Zorg, GS is the biggest flip flopper around of late. I’ll have the Thursday post up in a few a minutes, nice ADP # just out.

  61. 61
    DaveH Says:

    I bought some more GLNG in the pre-mkt at $37.18, near the low yesterday, off 1.61% from the high. Someone probing around with the ask price there now at 37.01. Might be a place to get on that rocket. I am up 89% from my Feb and March 2011 buys with GLNG.

  62. 62
    zman Says:

    Thursday post is up.

    Nice buys DaveH

  63. 63
    skimo Says:

    GS and MorganStanley bullish on oil while MF Global Holdings calls bull trap on oil.

  64. 64
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