10
Dec

Wrap – Week Ended 12/09/11

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Wrap Notes

1) Much ado about nothing week for equities. Broader markets and energy equities had big swings but ended the week little changed. We largely sat on our hands in the ZLT and ZMT portfolios. Oil largely tracked equities in front of the coming week's OPEC meeting. Look for no reduction in quotas but quiet slippage in February deliveries as Libyan production more slowly ramps after an early post Ghaddafi rise in October and November (now 0.4+ MM Bopd vs the pre conflict high of close to 1.6 MM Bopd).

  • This week's closed positions: LINE – Sold my long held position in LINE at $36.92, up 177%, as part of a portfolio repositioning.

2) Rig Count Watch: Oil rigs jump, Gas Rigs Slump. While the U.S. oil directed rig count continues to drift higher (sometimes in spurts but inexorably higher) the decline in the natural gas count has of late taken on a decidedly steeper slope. Not surprising as more operators get their Haynesville acreage HBP'd (the Louisiana land count is now cliff diving).

3)  Natural gas production remains too high and the storage surpluses to the five year average and year ago levels are swelling each week. Next week's report should present a good opportunity to recalibrate analyst's models as it should represent the first cold in line with "normal" readings of the season. (see graphs below the wrap table )


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14 Responses to “Wrap – Week Ended 12/09/11”

  1. 1
    crysball Says:

    EPA Clarification on fracing:

    http://bismarcktribune.com/news/state-and-regional/epa-says-fears-about-fracking-moratorium-unfounded/article_8a72ba30-1ae3-11e1-a738-001cc4c03286.html

  2. 2
    Wyoming Says:

    Carry over comment about HAL and BP needing closure;

    Had lunch Thursday with HAL reps for our area. My only real question was whether they were still working for BP with the lawsuits and all. Answer is Yes. HSE to BP is a commercial lever. Some things never change, been that way for decades.

  3. 3
    Wyoming Says:

    The EPA spin on making fracing illegal is the whole diesel content thing. Since the fluid volumes are so large the carrier fluid is usually water (cheapest). Yes, in the unconventional days and prior, we would sometimes frac with diesel(no gas volatility so please don’t associate with BS “gas frac”). “Oilfracs” were usually in formations sensitive to water. So, you ask, if we don’t “oilfrac” anymore, why is the diesel an issue. Mainly, the answer is in the pre-hydration of the polymers used for creating slickwater fracs (water) and in some of the additives we use. Now, the industry can easily manufacture switch from diesel to some other material but the EPA/greenies will not define what the characteristics of diesel is. BTW, the concentrations in the the frac fluid is miniscule. That does not matter.

    So, once they get all the oil banned from frac fluids, guess what will be next? Drilling mud. Point is, we have found that the quickest way to drill thru the shales (remember the reason why we used to oil frac?)is with oil based mud. We don’t mind using it to drill because unlike fracing where the diesel may be lost and not recovered (diesel at the pump = ~$150/bbl)we can recover almost all the oil based mud.

    Ban OBM (Oil Based Mud) from current drilling practices, expect to see much longer drill times and much more lateral / sidetracks.

    Bring on the band; storage is at an all time high, and we need more revenue ($200 oil) to pay for ceramic proppants.

  4. 4
    Wyoming Says:

    Band=ban I do love tight supply.

  5. 5
    crysball Says:

    Wyoming……..Would a ban on OBM create opporttunities for the edible oils companies to [FTK etc.], or are there properties in OBM which cannot be replicated by edible oils????

  6. 6
    Zorgnak Says:

    OPEC output ‘highest in three years’ at 30.785 mln bbl per day in November
    http://uk.news.yahoo.com/opec-output-highest-three-years-134251389.html

  7. 7
    zman Says:

    Wyoming – thanks much

    Zorg – as per one my comments last week, its Saudi and they are sending a message not to defy them before the meeting this week.

  8. 8
    snuhart Says:

    Z Have you had a chance to update your thoughts on XCO ?

  9. 9
    zman Says:

    re 8 – no but have it on the list for this week.

  10. 10
    Wyoming Says:

    Crys, we are a capitalistic bunch, which is why the EPA won’t tell us which “Diesel” will be banned. It really is idiotic.

  11. 11
    snuhart Says:

    re 9 Thanx

  12. 12
    zman Says:

    SSN – new presentation on their website for meeting with investors Monday and Tuesday. Will include anything noteworthy in the Monday post.

  13. 13
    jim bob is my jesus Says:

    MHR Magnum Hunter Resources announces new joint exploration agreement with Stone Energy (SGY) ($4.60)

    The contract area covers an existing mineral leasehold position currently owned by both companies located in Wetzel County, West Virginia.
    Terms of the new Joint agreements include Magnum Hunter’s wholly owned subsidiary, Triad Hunter, LLC and Stone Energy working together within the contract area on an equal and joint basis on approximately 1,925 acres with the objective of drilling nineteen new horizontal wells in the Marcellus Shale over the next two years.
    Earlier this year, Stone Energy and Triad Hunter drilled and completed two horizontal Marcellus wells, with 50% ownership interest each, on a portion of this existing mineral leasehold. It is anticipated that the additional joint effort will drill and complete the first eleven wells during 2012 at an estimated capital cost of $47M.
    Estimated total combined capital costs associated with the contract area for the Joint agreements will exceed $100M.
    Stone Energy will be designated as operator within the contract area and each company will own a 50% working interest. In a separate agreement, Stone Energy agreed to commit its share of production from the contract area to the Eureka Hunter Pipeline System operated by Magnum Hunter’s wholly owned subsidiary, Eureka Hunter Pipeline, LLC.
    The additional 1,925 acre contract area is a portion of an existing 5,288 acre leasehold in which Triad Hunter will retain 100% interest in 2,979 acres. During 2011 and unrelated to the additional contract area, Triad Hunter drilled and completed three (3) horizontal Marcellus wells with a 100% ownership interest. Triad Hunter anticipates drilling an additional nine (9) wells with a 100% ownership interest on the 2,979 acres.
    Management comments:
    “We anticipate establishing new significant production volumes in this region during 2012. This joint venture will benefit greatly due to the take away capacity, processing and multiple market capabilities associated with our Eureka Hunter Pipeline system where 100% of these new anticipated gas volumes have now been dedicated.”

  14. 14
    skimo Says:

    Joan showing some love to Jim Bob and company:
    http://www.forbes.com/sites/joanlappin/2011/12/11/gulf-of-mexico-true-believers-on-pins-and-needles-as-mcmoran-completes-davy-jones/?partner=yahootix

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