Vacation Friday

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I'm sans Excel here so no oil or natural gas inventory charts today so here are some random thoughts:

Nonfarm payrolls came in at 18,000 vs expectations of 125,000+

Unemployment rate is 9.2%, vs 91.% expected

President Obama to address the nation re the payrolls report at 10:35 am EST. Good luck spinning those numbers in a positive light.

Crude -

up 2% yesterday buoyed by the equity market, not by the EIA numbers which were OK but not that stellar. We did see a surge, and it will be a temporary one, in imports and that should not be much of a surprise as some oil tankered offshore came onshore in the wake of the SPR news, in fear of a dip that hasn't occurred. Should we have gotten equity market follow through on better Payrolls data I would have looked for a quick test of $100. The Brent spread has blown back out from $20. So the SPR gift to Europe helped for about a week if that.

Gasoline demand remains strong but should be at just about peak levels for year season/year.

Distillate demand saw a minor pop but remains mired in the doldrums

Natural Gas -

The 95 Bcf injection was an outlier, not really sure what gives with that, perhaps it's a stealth adjustment by EIA or more likely there was something odd in EIA's data that will get partially reversed with next Thursday's release. Regardless,

  • storage is now 8.9% below year ago levels and
  • 1.9% below the five year average

Stock stuff

Pretty quiet in terms of news in the group today, look for some more data flow next week from an energy conference and from analyst who will be marking their 2Q models to market commodity prices. Also look for NFX to provide an operations update on the Uintah any day now through their 2Q call. I'd bet they make it a separate event.

I find headlines like "Investors rush to energy" lazy but amusing. I never left. Why they did I don't know. We are more long now than in quite some time and further strength prior to earnings may cause us to lighten up in certain trading positions.

Bakkens - obvious squeeze under way in this weather bitten group. 2Q numbers are rear view mirror more than ever now and the focus on the calls will be about the slope of the ramp coming in 3Q.

CHK - $600 mm Granite Wash Royalty Trust - CHK, always looking for alternative ways to raise cash and with VPPS being viewed by the analyst crowd, files for an RT. If it goes well look for more of these from them.

Analyst Watch

PETD - Upped to Buy at Pritchard

BAS - RBC ups target $4 to $37

ATPG - Rodman initiates at Outperform with a $22 target

PXD, CLR, NFX, XEC upped from Hold to Buy at Stiffel

Housekeeping Watch: Posts will be back to normal on Monday.

94 Responses to “Vacation Friday”

  1. 1
    crysball Says:

    The NY Times (and others) are suggesting the Corn Ethhanol subsidies will be ‘thrown under the bus’ as part of the budget deal.


    Wouldn’t removal of corn ethanol subsidies be a major catalyst for GEVO, since they are foucused on higher value chain building block[Isobutanol & PET] molecules in their bolt-on additions to existing Corn Ethanol plants?

    In both Isobutanol and PET isn’t there a global market for both?

  2. 2
    Zorgnak Says:

    Reaction to NFP takes SP Futs down to support at 1336.75, closes gap from prior econ report. 1329 is now next significant support area.
    S&P Futures Levels prior to NFP report in 8 minutes

    1353.25 Resistance, Minor CLVN, O/N High 1353.50
    1347 O/N Low, Thurs NVPOC 1346.25, CHVN 1347.25
    1344.25 Thursday Range Low, Gap below
    1342.25 Support, CLVN, Gapped through on Econ Report
    1336.75 Support, CLVN, Gap Close
    1329-30 Support, CLVN,

  3. 3
    Zorgnak Says:

    scratch the comment about report in 8 minutes…forgot to erase

  4. 4
    zman Says:

    And to top off the more than ugly jobs report the birth/death adjustment was +131,000.

    Market shorts are screaming to sell all stocks now. Of course, it sure hasn’t worked for them of late. But now they will point to a lower high on the S&P 500.

  5. 5
    BirdsofpreyRcool Says:

    One Ugly Jobs Report, for sure.

    Credit turned on a dime, along with Europe and US futures… now pretty red. Two of the more watched indicators, IG and 2yr swap rate, both blew 2 bps wider. This is a big move, in investment-grade land. High yield is 14 bps wider.

    President Obama is coming on TV at 10:35 ET to “deliver a statement on the US monthly jobs report.” Guessing it’s time for “more stimulous” and “extend unemployment benefits.” Sounds like “MORE COWBELL” to me… but maybe the tune will change. One can always hope!

  6. 6
    Zorgnak Says:

    Areas of interest
    BEXP…support @ 30.50

  7. 7
    elijahwc Says:

    BAS – Pritchard puts it in perspective

    “Stellar June Sets Table for 2H and Beyond –

    June monthly rig hours tallied 73,600 versus our last printed estimate of 70,100, which in turn drove monthly utilization to 74% (ahead of our 70% estimate). We believe this strength was widespread geographically, and will result in service rigs coming out of stack. Interestingly, though we hear concerns about labor costs, we do not believe labor cost inflation is yet affecting BAS even as it brings on rigs. As for Trucking hours, the 178,300 in June came in just under our 179,300 estimate; BAS added five fewer trucks than we expected during the month. The company reconfirmed the revenue guidance – up 18%-20% sequentially – it gave a month ago. Factoring the revenue guidance including the June monthly results and the estimated impact of higher revenue, our revised eps estimate for 2Q is $0.48, up from an admittedly stale $0.35. Our full year estimates now stand at $1.92 and $2.73 for 2011 and 2012, up from $1.51 and $2.07. Our revised target is $43, up from $38, based on 5.2x estimated 2012 EBITDA”


    and on a related note the stock will be down today for all the right reasons, a cap-x hike

    “Given that outlook, we have recently obtained Board approval to increase our 2011 capital budget by $25 million. Those funds will be used primarily to purchase fluid services assets including trucks, tanks and disposal facilities. Our total capital expenditure program for 2011 is now expected to be approximately $183 million.”

    Note the need for speed in “fluid services”.

    Think HEK & GRH as nearby research to BAS.

  8. 8
    crysball Says:

    There seems be a dearth of M & A activity in the Oil Patch. Do you expect M & A activity to pick up in Q3/ Q4 as we appear to be past the valuation dip in E & P Juniors and Single Dight Midgets?

    Also Canadian E & P Juniors seem to frequently use Warrants but this tool does not seem used by US E & P Juniors. Why are warrants not in the ‘Toolkit’ of US E&P CFO’s?

  9. 9
    Zorgnak Says:

    I had NOG support at 23.25 and KOG at 6.25 yesterday…both holding in premarket..so far

  10. 10
    RMD Says:

    MLP thought: since I’m a hopeless skeptic, I am taking the CHK GW deal as a straw-in-the-wind that MLPs are overvalued. The GW is supposed to be one of the highest ROI drilling opportunities in the USA. So if you need cash flow, drill and harvest cash…
    unless the public will pay you upfront and excessive am’t and you can bring forward the cash flow in a sale-type structure.
    There is a dynamic here I don’t yet understand. MLPs are supposed to monetize existing mature, slow decline production. RTs are coming with a few existing wells (of unknown maturity) and some development opportunities (which in VOC’s case the RT owner pays for, not the parent if I read it right). For a finite life lesson, see Z’s discussion of WHX.
    Details are slim, but $584mm for 28,700 acres is $20,300/ac. You get 60 wells and 122 development wells yet to be drilled, but RTs have to pay for those development wells out of existing cash flow (I think).

  11. 11
    zman Says:

    Crys – I do expect M&A to pick up post summer. Everyone is in “why rush now?” mode at the moment which makes sense given the economy. We are seeing land deals and small public for private action but I do expect the public for public market to heat up as we enter the fourth quarter. My thought is a little better read on the political side of the market, more tightness in the oil supply/demand space (higher prices take the stocks higher and the would be buyers see it and go ahead and bite).

    RMD – good thought, have not looked over the deal specs at CHK yet, will do next week.

    Opening moves look more like a speed bump and bear trap than the start of a reversal of the last two weeks. Just a thought but week jobs in the U.S. have barely retarded gasoline demand, and mogas stocks are fairly low vs year ago levels. Cushing stocks are away from the 40 mm mark which gives WTI trouble but mostly, it’s world demand that continues to be stout but which is about to surge in 3Q and 4Q and OPEC’s lack of significant spare capacity will become glaringly apparent. So I look at these moves in our group oppy’s to buy on a strings of weak days and to trim things I don’t find as attractive on strings of green days.

    Noting things like HAL, which have been breaking out but are still quite cheap and getting cheaper if they stand still since the denominator E will be rising, are quick to recover this morning’s loss, already halved the loss on the day in the first 10 minutes.

  12. 12
    zman Says:

    Hear ya Zorg – NOG, KOG shrugging off the jobs data early. As in “anything that allows goats to cover shorts gets bought”

  13. 13
    zman Says:

    CHK, FTK, GEOI go green.

    Austin “I’m outta here” Goolsbee ~ President pushing for extension of the payroll tax cut.

  14. 14
    RMD Says:

    I haven’t seen deal specs either, just guessing from the structure of the VOC deal.

  15. 15
    zman Says:

    Thanks RMD – if you care to do the leg work, I am all ears. I’ll be back around a spreadsheet by Sunday.

  16. 16
    tomdavis12 Says:

    RMD: Are you still long VNR? Any of your names at buy levels? I am in the dividend increase camp with Z on LINE. Always looking for another of such quality.

  17. 17
    elijahwc Says:

    I think FTK is breathing in some BAS air and the break above 9 may now lead to an assault on 10. Something I erroneously though would occur off the analyst days earlier.

    I also getting vibes that inroads are being made in Poland, Turkey and the good old USSR

  18. 18
    RMD Says:

    td12 I’m still long VNR but don’t find it , nor the group, esp. attractive here per my comment. I bought it when it yielded 29% so it can just sit in the corner and pay me. Because of it I keep and eye on the group.
    My sense is MLPs are a logical tax-related move for mature assets. RTs are the 2nd or 3rd derivative where the seller knows far more than the buyer (hte best lesson on what happens in that case is reading Smart Money again).
    A quich look at the CHK deal is…hold your breath…it’s really complex at a quick read! Someone understands it = the guy who put it together but I probably never will.
    BTW, CHK pays for the development wells: I’m wrong again.

  19. 19
    zman Says:

    FTK – yeah, and pretty good volume on the time of day. It was going for $10 pre analyst day, pre earnings and then they popped that deal on us, time forgives that and here we are. Keep the color coming, it’s sitting in the ESA’s

    re 18 = LOL, did you expect it to be otherwise? That’s why I didn’t jump at a quick analysis of it.

    Bakkens selectively taking a bit more of hit now, tempted to add more trading BEXP.

  20. 20
    zman Says:

    Green guess for Friday = HAL closes Green, as the market goes back towards but closes short of par. People obviously want into the Service names, which report early and well before the E&Ps, in July. Slower international growth well known now, shouldn’t raise any eyebrows, forward talk from HAL and SLB should be even more positive than last quarter. More focus on long term with global shales to get more comments.

  21. 21
    zman Says:

    HAL earnings 7/18
    SLB earnings 7/22

  22. 22
    BirdsofpreyRcool Says:

    somebody was hitting pretty heavy on the HAL “buy button” yday… agree with a higher close.

  23. 23
    BirdsofpreyRcool Says:

    higher than here, that is. jmho, of course.

  24. 24
    elijahwc Says:

    Here a new one. It appears that the brand new MO MO darling of the ball is none other than ……….DBLE

  25. 25
    Robert Says:

    I’ve been in MLP & high paying dividend stocks for the last year and have been doing well, 5.8% yield and stocks up 10%.
    Looking for dividend idea (Dogs of the Dow) try it!

  26. 26
    DaveH Says:

    RE: 19 GFS on Canadian Ex +0.85% today. It has been moving up the last 5 days.

  27. 27
    zman Says:

    POTUS Watch: Any minute now …. no, wait, he’s late. Hell, I’d take my time walking out there too.

    Look for a mention of the payroll tax reduction extension.

    And for a govt matching program for job less vs job postings.

    Hopefully no mention of “well, we were handed a big mess”. May be true but not helpful as its essentially a shoulder shrug at the problem.

  28. 28
    zman Says:

    Where’s ADP with commentary on the divergence?

  29. 29
    BirdsofpreyRcool Says:

    #27 — yeah. The govt intervention in the housing mrkt to stimulate home buying worked pretty darn well too.

    Do these guys never look back at the actual results of all this stuff? Clearly, not.

  30. 30
    BirdsofpreyRcool Says:

    Sorry… sometimes I just don’t know when to shut up. But it’s just so obvious… that is why i freaked out when Uncle Ben said he was clueless about why the economy isn’t stronger. Doesn’t take a genius to see why. Just sayin’….

  31. 31
    zman Says:

    BOP – no problem, I feel your pain. And if he actually says that one, tip back the whole bottle of petron.

  32. 32
    elduque Says:

    BOP- EXXI/MMR not behaving like your rumour was either inaccurate or is not out on the street. Former or the latter???

  33. 33
    BirdsofpreyRcool Says:

    elduque — definitely not “common knowledge.” Teddy Cam stuff.

  34. 34
    BirdsofpreyRcool Says:

    Ben said he “didn’t know why the economy isn’t stronger” in his last public appearance. Yes.

    I amost threw up.

  35. 35
    zman Says:

    Going on past experience, El-D, I would think it’s more a function of payrolls weighing on everything and a “prove it to me” attitude towards the ultra deep which is still very much deserved. From what I’ve seen, I think the play will work but people are not willing to give them a lot more credit (especially MMR) until the results are more definitive.

  36. 36
    zman Says:

    POTUS 30 minutes late now. Tee time jokes piling up on twitter. Robert, would you please let the President play through?

  37. 37
    BirdsofpreyRcool Says:

    z — #35 very well said. That is exactly it.

    There are two camps out there: Those who think the UD play works… and those who will believe it works only after it flows (they move the production platform on site, hook up, and turn on the spigot). But I have a sneaking suspicion that some time in mid-Sept, we will start to see even the “Show-Mees” start to move into MMR stock in anticipation of the end of year hook-up of Davy Jones #1. That will drag EXXI along with it, of course.

  38. 38
    1520sbroad Says:

    #29 – there is but one result that matters — re-election.

  39. 39
    zman Says:

    re 37 – Yeah, I think the DVN CEO will ultimately eat crow (sand?) over his “It will never be able to be produced from that depth” comments.

  40. 40
    zman Says:

    Pickens Plan – Turns 3 today. Not exactly a thriving toddler.

  41. 41
    zman Says:

    POTUS on now.

  42. 42
    elduque Says:

    Obama on now.

  43. 43
    Popeye Says:

    Bias exposed in NYT shale gas bubble series.

  44. 44
    Paul in Kansas City Says:

    RMD; i think you can look HGT, DMLP, SJT, and SBR as examples of RT that have been around for multiple years and I would be much more interested in these securities rather than a new issue. SBR has consistent nat gas volumes on a 12 month basis over a 7 year perios. There are alos RTs that are paid on a revenue basis (DMLP and SBR); and after expenses as you noted (HGT). The best energy info on these besides ZMAN is http://www.mcdep.com; I love our blog here but Kurt Wulf does share some of his models with thepublic and are worth reading. I think the Canadian company Enerplus (ERF) is also worth a look as it does distribute cashflow and has core Canadian properties; plus Bakken and Marcellus exposure; the majority of its revenue is oil derived and I think this one complements a portfolio of DMLP, LINE, VNR, HGT, etc.

  45. 45
    mimster90 Says:

    re 30 the old unintended consequences coupled with the funding of tax breaks and a couple of decade long wars with borrowed money.

  46. 46
    BirdsofpreyRcool Says:

    credit markets going redder as he speaks… just fyi

  47. 47
    mimster90 Says:

    MLP – BBEP pays 8.5%

  48. 48
    milepost_43 Says:

    WPRT…as I’ve posted…been watching this one from $10ish..shoulda coulda woulda…chart looks like a good entry point is arriving with Defined Risk at about $21ish…am getting on the WPRT train….like this recent PR of GM pact. http://tinyurl.com/3q7nzhj

  49. 49
    zman Says:

    He did mention the jobs hookup thing with the jobs listed thing, kind of obvious. Not sure why “right now” wasn’t “two years ago” on that one but oh well.

    Equities definitely weakened during that speech. No Q&A.

  50. 50
    Justin Says:

    Our leaders work on short-term re-election. China’s work on long-term domination. Bad deal.

  51. 51
    zman Says:

    HAL holding same level nicely,

    NOG down 15 cents. Expect a new piece there on Tuesday.

    MP – WPRT – working on that one. Interest rekindled after late June deal with GM. I thinking this is a much cleaner way to play NG as a transportation fuel than CLNE.

  52. 52
    Zorgnak Says:

    Crude holding support 96 area
    SPFuts holiding 1329-30 support

  53. 53
    Justin Says:

    Don’t get me wrong; I’m all for democracy. I just hope the voting public can see thru all the bunk.

  54. 54
    Zorgnak Says:


    S&P Futs

  55. 55
    Justin Says:

    Got my Wind River yesterday…That baby was in queue for quite awhile before getting snapped up.

  56. 56
    zman Says:

    Failed to mention in post, EPA came down with new rules yesterday that call for tough reductions in SOX and NOx by 2014. Had been working with industry on the rates, but this is accelerated, coals taking a bit of a drubbing on it.

    Off to the beach for awhile, group doing quite well considering the S&P action.

  57. 57
    BirdsofpreyRcool Says:

    Justin — I’ll check in and see where they are on raising the $2mm. I would expect the stock to move up, after that ceiling is removed.

  58. 58
    Dillon Says:

    NOG just went even with the open. It seems that stock just goes back and touches these resistance levels Zorg points out and then keeps rising into the next acceptance area never to return back. Even on Red days.

  59. 59
    Justin Says:

    Thanks BOP.

    GEVO – is the isobutanol an end-product “drop in” for gasoline, diesel, and fuel oil blendstocks? I’m trying to understand the diff between GEVO and KIOR. Seems Gevo is corn-based and KIOR uses southern pine biomass?

  60. 60
    RMD Says:

    PaulKC thanks, never looked at McDep. Some good background there.

  61. 61
    BirdsofpreyRcool Says:

    Justin — isobutanol is an intermediate chemical… not sure if it’s a drop in for jet fuel… but that is one of the main end mrkts. Save up all your questions (especially about the competitive landscape). With z’s permission and help, GEVO will present their case to us directly on July 19th.

    I have lots of questions about competitors also. Just coming up the learning curve there myself.

  62. 62
    Zorgnak Says:

    Z, BTW thanks for the NG mention yesterday…

  63. 63
    Zorgnak Says:

    NOG…Buyers showed up at support. A close above 23.75 would reject acceptance below and setup further rotation upward…got to be rather discouraging for the grizzly guys

  64. 64
    BirdsofpreyRcool Says:

    Interesting… Europe down. US down. Credit down.

    VIX up.


  65. 65
    BirdsofpreyRcool Says:

    should say, VIX up only a smidge… just a little suprised, that’s all.

  66. 66
    VTZ Says:

    My understanding is that isobutanol would be most similar to light diesel molecules.

  67. 67
    VTZ Says:

    I believe that isobutanol would be used in smaller percentages like ethanol in gasoline.

  68. 68
    BirdsofpreyRcool Says:

    Thank you, VTZ. I know it’s used for jet fuel… just don’t know if it’s a “drop in.” But i do know that jet fuel is currently the most attractive market for GEVO’s biobutanol product. They have pre-contracted for everything they plan to start churning out in 1Q12… and then some. Lots of room for growth. Stock might not do a whole heck of a lot, until we get closer to the 1q12 commissioning of that first ethanol plant change-over. But at some point, stock will move up in anticipation of that. Also, totally did not expect the bio-PET announcement the other day. There is truly a bunch of rocket scientists at GEVO… and they are not sitting still.

  69. 69
    BirdsofpreyRcool Says:

    Also, b/c it’s “bio-based”… i think the fuel gets special treatment for European airlines. (Generates credits, or something along those lines.)

  70. 70
    DaveH Says:

    GLNG +4.03% today. Coverage at http://www.fool.com/investing/general/2011/07/07/huge-dividends-from-americas-energy-game-changer.aspx

  71. 71
    milepost_43 Says:

    St James US Development Group LLC rail terminal expansion….Expected to be completed by the fourth quarter of 2011, the expansion will reportedly double the terminal’s current capacity to 130,000 barrels or two unit trains per day. Served by the Union Pacific Railroad.
    FWIW, my GOOG alert on the XL pipeline has gone off the charts after the Yellowstone leak…watch the legal “fireworks” start IF it gets Govern approval…..Transcanada and Enbridge better hope they don’t have another leak any time soon…….

  72. 72
    BirdsofpreyRcool Says:

    HAL — breaking out in a sprint… SOMEbody(s) want to own this stock…

  73. 73
    RMD Says:

    Some guy recommended DBLE on Seeking Alpha “solely on price momentum”. How useful.

  74. 74
    zman Says:

    Speaking of things people want to own, see BEXP off today’s bottom.

    Hear ya on that RMD, don’t get me started. So many writing so much with so little knowledge.

  75. 75
    Zorgnak Says:

    Speaking of bottoms..loving the look of SSN’s this morning off support

  76. 76
    Zorgnak Says:

    SSN bounce off 2.75 support
    other support bouncers
    BEXP off 30.50
    NOG off 23.25
    KOG bounce within a penny of 6.25
    not too bad for a big red day..

  77. 77
    zman Says:

    re 76 – thanks and not bad at all given we are a high beta group, on a big red day in the broad market including $2.50 off oil.

    Not seeing any signs of panic selling in the group. Eyeballing the group, volumes very light.

  78. 78
    Zorgnak Says:

    SSN buy 2.75 sell 3 has been money …maybe this time it gets past 3..

  79. 79
    Zorgnak Says:

    S&P Futs….at resistance 1336.75..

  80. 80
    VTZ Says:


    Quality graphic about energy consumption.

  81. 81
    Zorgnak Says:

    Z…nice call on HAL

  82. 82
    zman Says:

    Re 80 – cool indeed, had not seen it quite that way, thanks.

  83. 83
    RB Says:

    I was last in S. Padre right after the Mexican Oil Spill…coped with it by staying drunk down at Louie’s….

  84. 84
    RobBanks Says:

    MVO should announce a distribution of $1.03 to $1.07 after the bell. An increase from last Q’s 82 cents.

    It’s been a very good income vehicle, total return 78% over the past 12 months.

  85. 85
    Zorgnak Says:

    The coming American Gas Shock?

  86. 86
    elduque Says:

    Thank you everyone for your help.

  87. 87
    BirdsofpreyRcool Says:

    WindRiver — never heard back from Jack (but, in his defense, said it wasn’t “urgent” to call me back)… but from what he has said this week, they should be close to done on raising that final $2mm.

    Meanwhile, I am pretty much out all next week. Will try to check in… but can’t count on it.

    Have a great weekend, everyone!

  88. 88
    zman Says:

    Ha! BEXP closed green.

    Had a great week, thanks for keeping me sort of in the loop.

    The Storm ride at Schlitterban should have been named the spine compactor, looking forward to getting back to my desk. Have a great weekend.

  89. 89
    mimster90 Says:

    zman I really like the category drop down in the upper left with the tags listed. I find myself using it often.

  90. 90
    crysball Says:

    MMR / EXXI upcoming POTENETIAL news

    JS(EXXI) speaks on the 18th at Global Hunter Securities Conference in San Francisco at 5:30pm CDT July 18th, a day prior to JB at MMR’s 2Q ea CC(on July 19th which starts at 9am.

    Next opportunity after the above [known at this time]ENERCOM, Dnvr
    August 15th 10:30 EXXI(Mtn time)
    02:30 MMR


  91. 91
    crysball Says:

    POTENETIAL should be POTENTIAL……or perhaps in retrospect is POTENT news.

    Oh well it’s Saturday.

  92. 92
    choices Says:

    Interesting analysis but in this political climate probably would not even be considered.


  93. 93
    crysball Says:

    EXCO…………..NO SALE


    The parties appearently felt the discounted future price for NG was NOT VERY ATTRACTIVE.

  94. 94
    zman Says:

    So good to be back to the office, wrap up in an hour or two.

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